Don't ignore HMRC "nudge" letters

HMRC has been issuing letters to taxpayers where there may be an error in their tax return for some time now.

In the past, it has been perceived that the letters were somewhat random, and were not necessarily an indication of any non-disclosure.  However, these so called “nudge” letters are now likely to be based on specific data.   HMRC has been collecting information using its “Connect Computer System” from government and corporate sources, together with data which is gathered from financial institutions in participating countries and jurisdictions throughout the world. This includes land registry records, DVLC, Airbnb, online platforms such as eBay and Gumtree as well as being able to access public social media account information.

Although such a letter from HMRC does not mean that there has been a non disclosure, it should be taken as a cue for the taxpayer to check their position and satisfy themselves that their tax affairs are in order.  In the past, a lot of the letters have focussed on overseas assets, but the latest enquiry trends are likely to focus on other areas such as discrepancies in benefit in kind reporting, investment income, residential property capital gains tax, the statutory residence test, as well as the abuse of covid support.

HMRC often issue a certificate of tax position alongside such letters and we would recommend that this is not completed.  The certificate is not statutory and there is no legal requirement for it to be completed.  Instead an appropriately worded letter should be sent in response to any such letter.

We can help you if you receive a “nudge” letter. 

We can review your tax returns and assist you to rectify any errors found.  Alternatively, we can help you respond to HMRC if you are confident that no error has occurred.

Do contact jacqui.birks@theburnsidepartnership.com for more information.