HMRC Nudge Letter Campaign Targets Persons with Significant Control

As part of the latest HM Revenue & Customs (‘HMRC’) nudge letter campaign, HMRC have once again cross-referenced Companies House records to Self-Assessment Tax Returns and are writing to anyone they believe to be a Person with Significant Control (‘PSCs’) asking them to consider the accuracy of their tax reporting. All PSCs are required to be reported to Companies House as part of the reporting obligations of a company. These records are publicly available and are regularly reviewed by HMR), therefore any discrepancies between company records and the tax reporting of those PSCs are easily spotted by HMRC.

Nudge letters are nothing new and do not necessarily mean there has been any wrongdoing. Still, they should be taken seriously and appropriate timely action should be taken following receipt of a nudge letter.

What are HMRC nudge letters?

Nudge letters are issued to taxpayers who HMRC believe may be affected by the area of the nudge campaign. In this case, HMRC is focusing on PSCs, however, nudge letter campaigns can focus on other areas, such as rental property income and overseas income, to name a few.

As aforementioned, receipt of a nudge letter is not a guarantee that your tax affairs are incorrect, but rather they are a prompt from HMRC to ensure that you have considered all relevant tax implications in the area they have focused on and giving you an opportunity to correct your tax position ahead of more serious action being taken.

There are currently 2 different HMRC nudge letters being issued to PSCs:

1. Provision of guidance on the various tax implications arising as a result of being a PSC, issued to PSCs who did submit a tax return for the 2022/23 tax year. These letters are simply asking PSCs to check, and where appropriate, amend their 2022/23 tax return to ensure that all income and gains have been included in the 2022/23 tax return.
2. Provision of guidance on the various tax implications arising as a result of being a PSC, issued to PSCs who did not submit a tax return for the 2022/23 tax year. These letters are asking PSCs to check whether they were required to submit a 2022/23 tax return in line with the guidance, and where appropriate, to make submission of their 2022/23 tax return.

Nudge letters typically come with deadlines of 4 – 6 weeks for a response. Where action is not taken, HMRC may seek to open a formal enquiry.

Can I ignore aN HMRC nudge letter?

In short, it depends. Irrespective of the background, we would always recommend that a full review of your particular circumstances is undertaken before any response is made to HMRC.

I’VE RECEIVED AN HMRC NUDGE LETTER, WHAT SHOULD i DO NEXT?

If you have submitted a 2022/23 tax return to HMRC, double check what has been reported previously and ensure that you are comfortable that all sources have been correctly reported to HMRC. If you have not submitted a 2022/23 tax return to HMRC, double check whether you should have made a submission to HMRC. It is also important to ensure that you are comfortable with what the letter is asking for and how best to respond, therefore seeking professional advice prior to responding to HMRC would be recommended. Our team of Tax Investigations specialists are well versed in dealing with nudge letter responses and can provide support with determining whether any additional details are required to be reported to HMRC.

If you believe there may be an inaccuracy with regards to your tax reporting for 2022/23 or earlier years, we would strongly recommend obtaining advice from a professional with suitable experience in HMRC disclosures. It is of utmost importance that any submissions are made to HMRC accurately, in order to ensure efficient correction of your tax affairs.

How can AAB help?

Our highly experienced Tax Investigations Team are here to help identify any additional information to report, can make the submissions and liaise with HMRC on your behalf, giving you peace of mind that the matter is being appropriately handled. If you receive a nudge letter and would like to discuss what this means for your and your tax affairs, please contact Michaela McCombie or your usual AAB contact in the first instance.