Thousands of taxpayers across the UK have received ‘nudge letters’ from HM Revenue & Customs (HMRC), prompting them to declare any unpaid tax.

The reasons for being targeted vary but, where taxpayers are unsure of what action to take in response, the result can be unshakeable concern.

Who is HMRC targeting with nudge letters?

HMRC has said there are a number of triggers that may lead to them issuing a nudge letter, but a majority of these communications would appear to be motivated by receipt of information that suggests a taxpayer has overseas income or gains.

They are also concerned that some taxpayers may not have paid the remittance basis charge – a flat rate tax charge on overseas income and gains for particular qualifying individuals living, but not domiciled, in the UK.

Letters may not detail what year income or gains were realised, meaning enquiries could relate to multiple tax years or, indeed, a collection of assets as opposed to just one.

A lack of transparency in certain instances is leaving some taxpayers feeling bemused about what they are expected to do.

What should you do if you receive a nudge letter?

The key here, is not to be unnerved and also not to assume that you are guilty of doing anything wrong. Taxpayers may be contacted because of:

  • Discrepancies in the data received from overseas tax authorities;
  • Changes to an individual’s personal circumstances or tax laws; or,
  • New information supplied to them that calls for further clarification.

We had a case where a client was nudged and had no idea why this was so. We contacted HMRC, who gave us some clues as to where they got the information from. It turned out the report to HMRC from an overseas institution was incorrect.

The letters themselves have no ‘legal force’ but failure to respond could result in a comprehensive tax enquiry which will be both intrusive and expensive.

Typically, you’ll have 30 days to respond before HMRC take any further action, though in some cases you may need to get back to them sooner. It is, therefore, worth taking note of specific deadlines referred to in the letter and ensuring these are met wherever possible.

Whilst promptness is imperative, if you cannot provide a pertinent answer within the allotted window of opportunity, HMRC may be willing to grant you an extension.

This will not happen automatically, though, and so you should seek advice if this is something you think you require.

Who can you turn to for help with HMRC nudge letters?

If you receive a nudge letter from HMRC, contact your accountant or tax adviser.

They can help you to avoid costly oversights, to communicate with HMRC and understand its requirements, to determine whether reasoning for the letter is founded and, where necessary, to calculate what is due.

In some cases, the Worldwide Disclosure Facility may be an appropriate means of declaring overseas income and gains, and this is a provision that we can advise on.

To speak to our team of tax advisers, about any communications you have received from HMRC relating to your tax affairs, or about declaring income or gains relating to overseas assets, contact us today on 01480 426500.

Link: HMRC sends ‘nudge’ letters to non-doms over unpaid tax

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