HMRC nudge letters

The implementation of the Common Reporting Standard (CRS) and other data exchange regimes means that HMRC have received, and will continue to receive, substantial information about the global tax affairs of persons with connections to the UK. This includes information about assets and income and gains generated outside the UK. This enables HMRC to target those who may have failed to declare all their UK tax liabilities accurately.

One way in which HMRC has been following up on information obtained is by issuing “nudge letters” by post. These typically request that the recipient either declares their UK tax affairs are in order or they will take urgent steps to bring their affairs up to date. The letters typically request a written response within 30 days.

HMRC are still issuing nudge letters requesting a response within 30 days, notwithstanding the recipient’s circumstances may be disrupted by the COVID-19 crisis. Regardless of the current circumstances, it is important that those in receipt of a nudge letter give very careful consideration to their reply and do not ignore it. In the event that a full reply cannot be provided within the 30 day period due to the current exceptional circumstances, this should be explained to HMRC.

Those in receipt of a letter should review their circumstances and consider why they may have received it. There may be an unknown liability as a consequence of a failure to take advice or due to a misunderstanding of the complex UK tax rules. Since the deadline for the requirement to correct expired at the end of September 2018, persons with undeclared income and gains may be liable to significant penalties of up to 200% of the tax owed. It may be possible to take steps to mitigate the effect of such penalties and it is important that expert advice is taken about this.

If you have any questions prompted by this note, or on any related matter relevant to you, please get in touch with a member of the Regulatory team.