HMRC’s Wealthy and Mid-Sized Business Compliance Team alert: Investors’ Relief claims

Investors’ Relief is a Capital Gains Tax (“CGT”) relief which is available on the disposal of certain shares. It applies to shares issued on or after 17th March 2016 that are disposed of on or after 6th April 2019. If a taxpayer is entitled to Investors’ Relief, qualifying gains will be charged to CGT at the rate of 10%.

To be entitled to Investors’ Relief, a taxpayer must have subscribed for shares that meet various conditions and must also have owned the shares for at least three years. The main conditions that must be met are:

• they are ordinary shares in a company;
• the taxpayer subscribed for them in cash, and they were fully paid up when issued;
• the company is a trading company or the holding company of a trading group;
• none of the company’s shares are listed on a stock exchange; and
• neither the taxpayer nor any person connected with the taxpayer is an employee of the company or of a company connected with it.

We understand that HMRC are distributing two versions of a letter to taxpayers who made Investors’ Relief claims within their self-assessment tax return for 2024/25 which either:

1. Ask taxpayers to review their share disposal and check that they meet the conditions for claiming Investors’ Relief. If the taxpayer finds that their claim is incorrect, they should amend their tax return.
2. Ask taxpayers who have not provided enough information on their tax return to show that they have met the criteria to claim relief, to amend the tax return to remove the claim for Investors’ Relief or provide sufficient information for HMRC to assess the claim.

If an amendment is needed, the taxpayer is instructed to make the amendment within 30 days of receiving the letter. If no amendment is made and/or HMRC takes the view that the claim to Investors’ Relief is incorrect, they may carry out a compliance check after the expiration of 30 days.

The letters explain that interest and penalties will be charged on any underpaid CGT. It is also made clear that any action taken by the taxpayer after receiving the letter will be treated as a prompted disclosure by HMRC for the purposes of calculating penalties. This means that the minimum penalty percentage which can be charged is 15% with a maximum of 100% in cases of deliberate and concealed behaviour.

Anyone in receipt of a letter from HMRC should take immediate action, speaking to their tax advisor as needed, and, where necessary, to ensure that an amended tax return is prepared. Failure to amend a tax return where it is necessary to do so may leave the taxpayer open to significant penalties, especially as they will be calculated on a prompted basis.