HMRC’s Latest Tactics – A nudge too far?

Contact Stuart Petrie

or reach out to a member of our Business Advisory, Tax Investigations team.

HMRC are increasingly using a new tactic called ‘nudge letters’ to target different taxpayer groups. The basic theory is that human behaviour can be influenced by emotional drivers such as a need to conform or feeling guilt. As such by providing a ‘nudge’ to both entirely compliant and non-compliant taxpayers, it might provide an incentive to everyone to question themselves and get their tax affairs in order.

One such letter that has recently been sent to taxpayers is a warning about the impending sharing of data between countries party to the 2018 Common Reporting Standard. The letter suggests that the client appears to have offshore assets and recommends that a disclosure under the Worldwide Disclosure Facility be considered.

However, nudge letters have also been considered controversial by many, as it is often not clear from the content of the letter whether it has been sent out randomly or to specific individuals who HMRC believe have not complied with their obligations. Moreover, in some cases HMRC are bypassing agents and instead are writing to taxpayers directly and this has been construed as an attempt to apply improper pressure. Where law-abiding taxpayers have disclosed everything properly are targeted unnecessarily it can be questioned whether this approach to tax compliance is truly justifiable.

So what should you do if you receive one of these nudge letters? Well first and foremost, it is important not to panic. HMRC are not exercising any statutory power by sending out these letters meaning taxpayers are not under any obligation to act upon it, especially if their tax affairs are up to date. If on the other hand, the letter reminds you of something you should have declared but have failed to do so, it can be a perfect opportunity to take advantage of more favorable terms for making a voluntary disclosure rather than facing investigation by HMRC and tough penalties as a consequence.

For more information please contact Stuart Petrie or your usual AAB contact.

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