Following the Spring Statement earlier this year and HMRC’s intensified efforts to close the tax gap, there has been significant activity across all tax areas. We believe it is timely to share insights into some of HMRC’s activities concerning income tax and capital gains tax (CGT). HMRC now receives more information than ever before, thanks to its powerful Connect software. Connect analyses all information HMRC holds on its various databases, highlighting connections such as bank accounts, companies, properties, and online selling platforms linked to the taxpayer.
Due to limited resources, HMRC cannot open enquiries into all identified taxpayers. Therefore, HMRC is sending nudge letters to taxpayers, placing the burden on them and their advisors to review the taxpayer’s affairs and liaise with HMRC accordingly.
We’ve seen HMRC targeting every aspect of income and gains, whether it be online marketing platforms like TikTok or Vinted, overseas income and gains, crypto assets like Bitcoin, or Investors’ Relief.
HMRC is clamping down on any means of income or capital gains to close the tax gap. If you receive a nudge letter or enquiry, we recommend reaching out to your tax advisor. Nudge letters are not legislative, but it’s important not to ignore them, even if HMRC has made an error. If a mistake has been made, HMRC has disclosure facilities available. By addressing these issues now, you’ll avoid higher penalties later. It’s in your best interest to submit a voluntary disclosure before receiving a HMRC enquiry or nudge letter to benefit from lower penalty rates.
It is worth mentioning that HMRC can ask for information to assess tax years where they have received data indicating that a taxpayer may not have reported all of their income and gains.
Regarding compliance activity, HMRC will be enforcing debt collection more rigorously than we have seen in a long time. If you have a tax debt, explore all means of paying it as soon as possible (note that the current HMRC interest rate is 8.25%, which is no longer cheap). If the only option is Time to Pay (TTP), prepare cash flow forecasts before contacting HMRC. For practical insight in approaching HMRC, speak to Danielle Ford head of our Tax Dispute Resolution (TDR) team. We’re here to support you and guide you from receipt of an HMRC communication through to conclusion.
What next?
Should you have any queries or receive a HMRC communication please do not hesitate to contact your usual Haysmac contact or Danielle Ford.
