The HMRC Wealthy Unit is sending one-to-many letters to taxpayers who made an Investors' Relief claim in their 2022/23 tax return.
There are two versions of the letter being issued. The first applies when HMRC believe insufficient information has been provided on the original return to grant the relief. The second version explains that from the information supplied, HMRC believe that the individual is ineligible to claim relief given the relevant qualifying conditions. Taxpayers must respond within 30 days of the date of the letter.
With a three-year qualifying holding period for relevant investments, the introduction of The Relief in 2016 meant the first claims were made in 2019-2020. There are no statistics on the number of claims made because to date HMRC has not been able to separate claims for Investors' Relief (IR) from claims for Business Asset Disposal Relief (BADR). Therefore, it is difficult to know how many individuals will receive the letters.
The original estimate of the cost of the measure was £60 million, but HMRC have acknowledged that only a small proportion of the BADR figure for Tax saved is related to IR. Before its abolition, the Office for Tax Simplification suggested scrapping it for lack of interest. The issue with IR is that it is only valuable if a gain is made. Given a choice between assets eligible for IR and assets eligible for Seed Enterprise Investment Scheme or Enterprise Investment Scheme Relief where there are provisions about losses, the choice for most investors is perhaps a simple one.
Useful guides on this topic
Investors' Relief: At a glance
Investors' Relief reduces the rate of Capital Gains Tax (CGT) paid on the disposal of unlisted company shares by persons who invest in shares by subscription.
Business Asset Disposal Relief (Entrepreneurs' Relief)
What is Business Asset Disposal Relief (BADR)? When does BADR apply? What is the rate of BADR? How to claim BADR.
Which investment relief: IR, BADR, SEIS or EIS?
What is the difference between Business Asset Disposal Relief (BADR) and Investors' Relief? How do they compare to investments in the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)?
SEIS: Seed Enterprise Investment Scheme
When can SEIS relief be claimed? What are the conditions for SEIS relief? What are the benefits of SEIS relief?
EIS: Enterprise Investment Scheme (Subscriber Guide)
When can EIS relief be claimed? What are the conditions for EIS relief? What are the benefits of EIS relief?
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