A property developer who had sold 3 properties over 2 tax years without filing 60-day CGT reports or including gains in self-assessment.
HMRC sent a “nudge letter” referencing Land Registry disposal data.
The client was alarmed and unsure whether to respond. They were worried about the scale of the potential liability and what penalties might apply.
They had been meaning to “sort it out” but had kept putting it off.
How We Approached It
Explained that HMRC’s nudge letters are not optional correspondence — they indicate HMRC holds information and expects a response. Ignoring them escalates the position from careless to potentially deliberate, which increases penalty exposure significantly.
Reconstructed gain calculations for all 3 disposals with proper cost bases, improvement expenditure, and selling costs.
Identified that one of the three transactions was more accurately characterised as a trading transaction (property acquired, refurbished within 6 months, and sold at a profit) — this was taxable as trading income rather than CGT, which affected the tax rate and loss relief position.
Filed amended returns and outstanding 60-day reports.
Prepared a full disclosure with penalty mitigation narrative: the errors were careless, the client was cooperating, and the disclosure was prompted but full.
Outcome
Total tax settled: approximately £27,400 across 3 disposals. Mitigation and cooperation evidence presented, resulting in penalties being charged at 15% — the lower end of HMRC’s published range for prompted careless behaviour. Interest: approximately £1,850. One disposal reclassified as trading income, which had implications for loss relief on a subsequent project.
