HMRC has been running a One-to-Many compliance letters campaign aimed at overseas companies holding UK residential property worth more than £500,000. The letters target a specific population: companies that have claimed Property Rental Business Relief on their ATED returns while reporting consecutive rental losses, and companies HMRC's data indicates own qualifying property but have not filed at all. The campaign batches have been going out into the 2025/26 tax year and into 2026/27, and the population is wider than is commonly understood.

If your company has received an OTM letter, you have 40 days to respond. If your company is in the target population and has not yet received a letter, the cleaner outcome is to act before one arrives. This page covers what the letters say, what the deadlines mean, and the three response routes (file the omitted returns, supply evidence supporting the relief claim, or make a voluntary disclosure through the Digital Disclosure Service) with the penalty arithmetic of each.

Who HMRC's OTM Campaign Targets

The OTM campaign uses a defined risk profile. HMRC has built the target list by cross-referencing several datasets:

  • Land Registry records of UK residential property held in non-natural-person names (companies, partnerships with corporate members, collective investment schemes).
  • The Register of Overseas Entities (RoE), which captures overseas entities holding UK property and their beneficial owners.
  • ATED return filings and Relief Declaration Returns held by HMRC.
  • Self-Assessment for non-resident landlords (the NRL scheme), particularly where rental losses have been reported across multiple consecutive years.
  • Information exchange under the OECD's Common Reporting Standard and bilateral mutual-assistance treaties with Crown Dependencies and Overseas Territories.

From that combined picture, HMRC identifies overseas companies that meet two criteria. First, the company owns or owned UK residential property worth more than £500,000 in the relevant chargeable periods. Second, either (a) the company claimed Property Rental Business Relief on the ATED return while reporting consecutive rental losses for tax years 2017/18 to 2019/20 (the focus window of the campaign), or (b) the company has not filed an ATED return at all, with HMRC concluding from the surrounding data that filing was required.

The campaign is intentionally narrow. It does not catch every overseas company holding UK residential property. It catches the companies whose external compliance data is inconsistent with the relief position claimed (or absence of any filing). The narrowness matters because a company that has filed correctly, claimed an appropriate relief, and reported genuinely commercial loss-making years for explainable reasons is unlikely to be on the letter list at all.

The Four Letter Variants and How to Tell Them Apart

HMRC issues four different versions of the OTM letter depending on the company's historic filing pattern and whether the company has a UK agent on record:

VariantRecipient profileTone of letter
1. Filed-with-QPRBR, agent representedCompany filed ATED return claiming Property Rental Business Relief; UK agent on recordTechnical, asks for evidence of qualifying letting
2. Filed-with-QPRBR, unrepresentedSame filing pattern but no UK agent on recordMore instructive, points the company to gov.uk guidance and the DDS
3. Never filed, agent representedHMRC believes ATED was due but no return on file; UK agent on recordAsks the agent to review the company's position and respond
4. Never filed, unrepresentedSame pattern but no UK agent on recordStrongest version; points to the DDS and offers a settlement path

The variant matters because the right response differs. A variant 1 or 2 letter is asking the company to justify a relief already claimed; the response is evidence-led. A variant 3 or 4 letter is asking the company to file the missing returns; the response is filing-led. Confusing the two produces a response that does not answer HMRC's question and burns days on the 40-day clock.

The 40-Day Window and What HMRC Is Asking For

Every OTM letter sets a 40-day response window from the date of the letter. The window is short by enquiry standards but generous by penalty-trigger standards; the design is to push companies into engagement before HMRC commits resources to a formal enquiry.

Inside the 40 days, HMRC expects one of three outcomes:

  1. A reasoned written response defending the existing position (variants 1 and 2), with the evidence schedule attached.
  2. A return-filing exercise covering the omitted years (variants 3 and 4), with the returns submitted via the ATED online service and the late-filing position acknowledged.
  3. A Digital Disclosure Service notification commencing a formal voluntary disclosure with the 90-day disclosure-submission window running from the notification date.

What HMRC is not asking for is a request for an extension. The 40-day window can be extended in genuine cases (loss of records, illness of the relevant officer, unavailability of the company's accountant) but the company must ask, with reasons, before the deadline. Silence is not an extension request.

QPRBR: Why HMRC Is Suspicious of Persistent Rental Losses

Property Rental Business Relief under section 133 FA 2013 requires the dwelling to be let to a tenant unconnected with the company on commercial terms, with a view to profit. The view-to-profit limb is the technical hook for HMRC's loss-pattern challenge.

The argument runs: if the company has reported rental losses every year for three or more consecutive years, the company is not letting with a view to profit, so the relief should not have been claimed. The argument is right in some cases and wrong in others.

Genuine cases where consecutive losses are consistent with letting with a view to profit:

  • The acquisition cost was financed with interest-bearing debt and the interest charge produces accounting losses, but the business is generating positive operating cash flow.
  • A major refurbishment in one year produced a large repair-and-renovation charge that pushed the business into loss; subsequent years are expected to be profitable.
  • The dwelling was vacant for refurbishment or seeking a new tenant for a substantial part of the year.
  • The rental market in the location softened temporarily; the business plan continues to anticipate profit.

Cases where consecutive losses are not consistent with the relief:

  • The dwelling is occupied by a connected party at below-market rent (the relief is lost on the connected-occupation point regardless of profit).
  • The company has set rents materially below market rate, signalling that profit is not the objective.
  • The accounts show consistent loss-making operating cash flow (not just paper losses from interest or depreciation), suggesting the business is not viable as let.

The response to an OTM letter that raises the loss-pattern challenge is to set out the commercial reality with documentary support: tenancy agreements showing market rent, accounts showing the cash-flow position once interest is added back, refurbishment invoices, agent marketing records, and (where relevant) a business plan that anticipated the loss-making years.

Three Routes Out: File, Evidence, or Disclose

The right response route depends on the variant of the letter and the underlying facts:

Route 1: File the omitted returns

For variants 3 and 4 (never filed), the route is to file the missing ATED returns covering each chargeable period in scope. If the company qualifies for Property Rental Business Relief or another section 133-149 relief, the return claims the relief; if no relief applies, the return reports the band-rate charge.

Late-filing penalties under FA 2009 Schedule 55 apply: £100 immediate, £200 at 3 months, £300 (or 5% of the tax due if greater) at 6 months, another £300 (or 5%) at 12 months, plus daily £10 from day 91 for some return types. The penalties run per chargeable period, so a company that has missed five years' worth of returns is looking at a Schedule 55 stack that can run to several thousand pounds before any tax-geared penalty.

Route 2: Supply evidence and defend the position

For variants 1 and 2 (filed with QPRBR), the route is to send HMRC the evidence supporting the relief claim. The evidence package typically includes:

  • Copies of the tenancy agreements for each chargeable period (showing the tenant and the rent).
  • Confirmation that the tenant is unconnected with the company (no shared shareholders, directors, family relationships).
  • Market-rent evidence (agent valuation, comparable lettings) supporting the rent set.
  • Accounts for each year showing the loss-making position and explaining the cash-flow vs accounting-loss distinction where relevant.
  • Any business plan or board minute that addresses the view-to-profit requirement.

Route 3: Voluntary disclosure through the DDS

Where the company concludes (with advice) that ATED was due and the relief either was not properly claimed or was lost, the route is the Digital Disclosure Service on gov.uk. This route accepts the substantive position, pays the tax owed, and brings the company current with HMRC at the lowest available penalty rate.

The Voluntary Disclosure Route Through the Digital Disclosure Service

The Digital Disclosure Service is HMRC's standard route for taxpayers (individuals or companies) who want to make a voluntary disclosure of previously unreported tax. The process for an ATED disclosure runs:

  1. Notification: the company (or its UK adviser) registers a disclosure on the DDS, identifying the company, the periods in scope, and the heads of tax to be disclosed. A reference number is issued and the 90-day disclosure-submission window starts.
  2. Computation: within 90 days, the company prepares and submits the full disclosure. For ATED, this includes the chargeable periods covered, the valuations at each relevant date, the reliefs claimed (and abandoned) for each year, the ATED due net of relief, interest under TMA 1970 s.86 from the original 30 April due dates, and a penalty offer under Schedule 24 FA 2007.
  3. Penalty offer: the company puts forward a penalty percentage within the Schedule 24 bands (0-30% careless, 20-70% deliberate, 30-100% deliberate-and-concealed) reflecting its own view of behaviour, supported by reasoning. The percentage at the lower end of the range reflects unprompted disclosure with full cooperation; the OTM-prompted disclosure sits in the middle of the range.
  4. HMRC review: HMRC reviews the disclosure, agrees or counter-proposes, and issues a closure letter once the company has paid. The closure is final on the periods covered; no further enquiry into those periods can be opened without new facts.

The DDS is not a way of bypassing the substantive ATED liability; it is the procedural shortcut for an agreed settlement that minimises the penalty side and closes the file.

The Penalty and Interest Calculus: Voluntary vs Discovery

The penalty difference between voluntary disclosure and discovery is the central commercial reason to engage with the OTM letter. The calculus runs:

RoutePenalty band (Sch 24 FA 2007)Typical landing point
Voluntary, unprompted0-30% careless / 20-70% deliberate15-20% careless / 35-40% deliberate
Voluntary, prompted (OTM-led)15-30% careless / 35-70% deliberate20-25% careless / 45-50% deliberate
Discovery without disclosure15-30% careless / 35-70% deliberate25-30% careless / 60-70% deliberate
Discovery, no cooperation30% careless / 70% deliberate / 100% deliberate-and-concealedUpper end of band

Interest under TMA 1970 s.86 runs from the original 30 April due date for each chargeable period, at the prevailing HMRC late-payment rate (currently 7.00% per annum as at February 2025, indexed to base rate plus 2.5%). Interest is not penal; it is compensation for the time HMRC has been out of the money. It applies equally on all routes; the difference is only in the penalty.

For a company sitting on five years of unfiled returns covering a £2 million dwelling without commercial letting (so no relief), the ATED owed is roughly £150,000 (five years at £30,000-ish per year). At the voluntary, prompted disclosure rate (say 22% careless), penalties add roughly £33,000. At the discovery, no-cooperation rate (say 70% deliberate), penalties add roughly £105,000. The £72,000 gap is the price of ignoring the OTM letter.

How ATED Sits Alongside the Register of Overseas Entities

The Register of Overseas Entities is the parallel compliance regime for overseas entities holding UK property. It was created by the Economic Crime (Transparency and Enforcement) Act 2022 and now sits within the wider ECCTA 2023 framework. RoE and ATED do not displace each other; an overseas company holding a UK dwelling subject to ATED must comply with both.

The interaction matters for three reasons:

  • HMRC has access to the RoE dataset. An overseas company that registered for RoE in 2023 or 2024 and has not filed ATED for the same property is a prime OTM letter target because the dataset directly evidences the property holding.
  • An overseas company that is not RoE-compliant cannot register dispositions at the Land Registry (sale, mortgage, lease grant). This does not displace ATED, but it tightens the operational position; a company under HMRC ATED pressure and Land Registry RoE pressure simultaneously cannot dispose of the dwelling without resolving both.
  • The beneficial-owner information on the RoE is visible to HMRC. Where the registered beneficial owner is a UK-tax-resident individual, HMRC has a route to that individual for residual liability if the overseas company is unresponsive. This is particularly relevant for trust-held arrangements where the settlor or beneficiary is UK-resident.

For the wider RoE position, see gov.uk's Register of Overseas Entities guidance. Sessions writing on ATED for overseas-cohort questions should treat RoE compliance as a precondition assumption: if the company is not RoE-compliant, the ATED conversation typically follows the RoE resolution.

A Worked Example: Five Years of Unfiled ATED Returns

A BVI-incorporated company holds a £2.4 million flat in central London, held through a structure with a UK-resident beneficial owner. The flat has been let to a sequence of unconnected tenants on AST agreements at market rent, with ordinary commercial loss-making years driven by mortgage interest. No ATED returns have been filed for chargeable periods 2020/21, 2021/22, 2022/23, 2023/24 or 2024/25. The company is RoE-compliant since 2023.

The company receives an OTM letter in March 2026, variant 3 (never filed, agent represented). The 40-day window runs to mid-April 2026.

Step 1 (within 14 days of letter): UK adviser engaged, file review commenced. Adviser confirms ATED Property Rental Business Relief is genuinely available for each year (commercial letting to unconnected tenants).

Step 2 (within 30 days): Adviser files five years of Relief Declaration Returns (one per chargeable period) claiming the section 133 FA 2013 relief, supported by tenancy schedules and accounts. Each return is accompanied by a covering letter referencing the OTM letter number.

Step 3 (within 40 days): Adviser writes to HMRC confirming the response, summarising the five-year evidence pack, and asking HMRC to close the position.

Penalty position: Schedule 55 FA 2009 late-filing penalties apply at £100 + £200 + £300 + £300 per year (so roughly £900 per year before tax-geared component; with a nil tax position from the relief, the tax-geared 5% is nil). Total penalty exposure: roughly £4,500 across five years. HMRC may agree a reduction to £100 per year on the basis of prompt response to the OTM, taking the total down to £500.

Tax owed: nil (relief applies). Interest: nil (no tax owed).

Total cost: roughly £500 in penalties plus adviser fees (£3,000 to £6,000 for the five-year file). The OTM letter, addressed properly within the window, produced a clean closure with minimal financial impact. Ignored, the same position would have escalated to a discovery assessment, an enquiry into the relief eligibility, and potential SDLT-side investigation, with adviser fees and penalties an order of magnitude higher.

How This Page Sits Alongside Sibling Pages

Authority Sources

The OTM campaign is HMRC's tool for closing the practical-reach gap on overseas-held UK residential property. The mechanism is intentionally simple: a letter, a deadline, and a choice of routes. The right response inside the window typically produces a clean, low-cost outcome; the wrong response (or no response) typically produces an expensive multi-year enquiry. For overseas companies sitting on unfiled ATED positions, the cleanest move is to act before the letter arrives.