Tax relief on property repairs: HMRC’s nudge letters

HMRC’s latest nudge letter campaign relating to tax relief on property repairs causes confusion - as its initial letter states that upgrading a heating boiler does not qualify for tax relief, but just months later, changes its mind. If HMRC can’t consistently agree on what qualifies for tax relief and what doesn’t, how can taxpayers be expected to navigate the rules?

In December 2023, HMRC issued a series of nudge letters aimed at guiding taxpayers through the complexities of claiming tax relief on property repairs. 

The use of ‘nudge letters’ or ‘one-to-many’ letters by HMRC is a common practice intended to inform taxpayers that HMRC holds some information relating to them, and generally prompts taxpayers to review their own tax return to see if that source or income, or claim for relief, has been dealt with correctly. It is arguably an efficient process for HMRC to deal with large volumes of the information that it holds to prompt those taxpayers that may have erred to make a correction with minimal input from HMRC.

While it’s an efficient process for HMRC if managed correctly, it can be frustrating for those taxpayers receiving prompts from HMRC (and incurring time and costs dealing with these) when they have submitted a wholly accurate tax return.

The property nudge letter issued in December 2023 highlighted the importance of correctly identifying deductible expenses related to property repairs. It included a comprehensive list of examples, some eligible for tax relief and others not. The intention was to help property owners make informed decisions on what they should and should not have claimed tax relief for and make the necessary corrections to their tax returns if they have got this wrong.

However, just three months later, HMRC has had to send a follow-up letter as it had itself erred in the information it had provided. Initially, HMRC stated that ‘upgrading a central heating boiler from an older, less efficient model’ was an expense ineligible for income tax relief. But, in the follow-up communication, it has had to correct its advice stating, if ‘you make an upgrade like this due to an advance in technology and the new item does broadly the same job as the old one’ then HMRC generally accepts this as an allowable repair.

While this clarification is helpful, it raises concerns, as you would think prior to sending out potentially hundreds of nudge letters asking taxpayers to check their returns, it is reasonable to expect HMRC to have checked the rules itself. It begs the question, if HMRC can’t consistently agree on what’s acceptable and what isn’t, how can taxpayers confidently navigate the rules? Taxpayers rely on clear guidelines to make informed decisions about their income and expenses, but when even the tax authority can’t get this right, it leaves taxpayers in a difficult position.