HMRC nudge letters guidance
Tax professionals are by now alert to HMRC’s tactics when it comes to ‘one to many’ approaches or “nudge” letter campaigns. These approaches are favoured by HMRC because it allows the department to target specific segments of the tax paying (or non-tax paying) public with relatively minimal effort.
Perhaps less well known is that HMRC likes to experiment with different delivery methods (some approaches have been made via email and SMS), target audiences and messaging to gauge what works best and streamline future activity.
After rightfully questioning whether less well publicised approaches might be a scam, people are usually alarmed to be on HMRC’s radar.
Types of nudges
There are two main types of nudges:
- HMRC has undertaken a risk assessment and identified a potential loss of tax that needs to be resolved.
- HMRC wants to educate certain taxpayers about complex areas of the tax system where mistakes are often made.
Upon receipt of a nudge letter, the burden arguably shifts to the taxpayer to take action and review their historic affairs. This might result in a variety of outcomes:
- it identifies the need to make a disclosure to HMRC
- it confirms that everything is in order and a disclosure is unnecessary
- complete inaction by the taxpayer.
If HMRC issues a letter in instances where a loss of tax is suspected, inaction from the taxpayer will undoubtedly lead to follow up questions by HMRC and higher penalties.
The educational letters do not necessarily require a response to be sent to HMRC. However, taxpayers are encouraged to carefully review their affairs, because HMRC will come down harder on taxpayers who received fair warning that they ought to do so if tax is later found to be underpaid.
What action should you take?
- If HMRC has issued a certificate of tax position alongside the nudge letter, we strongly recommend you do not complete it. The certificate is not statutory and there is no requirement to complete it.
- Double check the position. Tax rules are complex and so further exploration is often required alongside professional advice.
- If there is nothing to correct, a letter can be sent to HMRC confirming this to prevent HMRC chasing you.
- If there is an issue to resolve, careful consideration of your situation is needed. This will help ascertain the best disclosure method as well as the number of years that HMRC can assess. A disclosure can be made via the Worldwide Disclosure Facility, the Let Property Campaign or any similar Digital Disclosure Service. It should be noted that if deliberate omissions have been made and immunity from prosecution is needed, the Contractual Disclosure Facility is the preferred route.
How we can help
If a disclosure is needed, Crowe’s Tax Resolutions specialists have worked with numerous taxpayers (and their agents) to bring historic tax issues up to date. If you appoint us, we will:
- review the background of your case and identify all issues that need to be disclosed
- advise on the most appropriate steps to ensure a full disclosure is made to HMRC to reduce the possibility of HMRC asking follow up questions
- calculate the underpaid tax whilst ensuring all legitimate claims for tax relief / allowances are taken into account
- act as a buffer between you and HMRC so that you do not need to speak directly with HMRC
- ensure that HMRC does not overstep the mark, for example, by making requests for data that HMRC is not entitled to
- advise you on the likely penalty position and consider all mitigating factors to reduce penalties as low as possible
- liaise with third-parties to obtain the data that is relevant to your disclosure
- be able to assist you with your ongoing tax returns if you wish to appoint us as your agent.
Our team is accessible and approachable, and ready to answer your questions, giving you the confidence you need when dealing with a sensitive issue such as an HMRC enquiry or other tax dispute.
For further information, get in touch with a member of Crowe’s Tax Resolutions team or your usual Crowe contact.
