HMRC have confirmed they intend to send ‘nudge letters’ to certain taxpayers who hold shares in the year to 5 April 2020.

The letters are likely to target individuals who have made considerable gains during their lifetime and, in turn, inadvertently exceeded their ‘lifetime allowance’ for Entrepreneurs’ Relief.

Letters will be sent to those whose tax returns for the year to 5 April 2020 show proceeds from a disposal of shares, with this amount differing from that declared by the acquiring company. The nudge letters are likely being sent out to establish whether more sale proceeds in the year to 5 April 2020 should have been taxed at the higher 20 per cent Capital Gains Tax (CGT) rate.

Many business owners may have overvalued their earn-out consideration, which provides contingent additional payments from a buyer of a company to the seller’s shareholders, at the time of a deal so that more of the consideration qualified for the Entrepreneurs’ Relief tax rate of 10 per cent, rather than the standard CGT rate of 20 per cent.

We can help

If you receive a nudge letter, our team of experts can help to review your tax position, identify any shortfalls, and support you through the process of putting them right, or fight your case with HMRC. Get in touch with one of our team below.