Nudge letters represent HMRC’s ‘One to Many’ approach – a single communication which is sent to many taxpayers who have been identified concerning a specific tax risk. Nudge letters provide HMRC with a cost-effective way to communicate with many taxpayers.
HMRC continues to widen the scope of nudge letters. As the number of sources providing detailed financial information to HMRC increases, campaigns are becoming more specific and refined, focusing on smaller groups of taxpayers.
HMRC’s latest nudge letters relate to:
- Non-resident corporate landlords owning non-residential property in the UK
- Fuel and power supplies – risk of VAT errors
Non-resident corporate landlords owning non-residential property in the UK
HMRC is issuing nudge letters to non-resident companies that own non-residential property in the UK. The letters are being issued to companies that appear to have failed to notify HMRC for tax purposes. If you have an agent, they will not receive a copy of this letter, as HMRC do not hold a record of the company registering for Corporation Tax or Income Tax. If you receive a nudge letter, we recommend that you share the communication with a professional advisor as soon as the letter is received.
An individual will have 40 days to respond from the date of the letter; it is incredibly important that you respond to HMRC by the deadline to avoid incurring higher penalties.
The letter will be accompanied with a Certificate of Tax Position; there are serious consequences making a false declaration and as there is no de-minimis – caution must be taken. We do not recommend taxpayers completing the certificate, although a response to the letter must still be sent to HMRC before the 40-day deadline nonetheless.
Upon receiving a nudge letter, the action required will be bespoke to each taxpayer. Due to this, we recommend for a professional advisor to review your tax affairs, advise the action required and liaise with HMRC on your behalf.
Fuel and power supplies – risk of VAT errors
Since July 2023, HMRC has been issuing an educational nudge letter to energy companies. The letter requires businesses to check their systems and processes as HMRC has identified some systems that are not applying the legislation correctly.
HMRC has set a deadline of 45 days from the date of their letter to notify them of any errors that have occurred. As before, it is incredibly important that you respond to HMRC by this deadline.
Disclosures and penalties
If you have discovered an error or omission within your tax returns, disclosing this before HMRC sends a nudge letter or opens an enquiry will lead to a more favourable outcome. This can result in lower penalties, as the disclosure would be considered ‘unprompted’. Alternatively, if you have received a nudge letter, HMRC will deem your disclosure as ‘prompted’, meaning potentially higher penalties.
HMRC has been sending follow-up communications to nudge letters that have not been responded to. HMRC has a database of taxpayers to whom it sends a nudge letter, and a record will be kept noting those who have not acted. If HMRC finds an error, we expect more robust action from HMRC with the possibility of higher penalties.
When to seek advice
If you have received a nudge letter from HMRC, a statutory enquiry notice, or believe you have made an error or omission in your filing to HMRC, we recommend that you immediately seek professional advice. This will help mitigate any penalties that may be due, and an experienced professional advisor can help navigate the disclosure or enquiry process. Additionally, your advisor can assist with related issues, such as agreeing to a payment plan with HMRC for the additional tax liabilities due.
We possess detailed knowledge of HMRC’s powers and processes and can ensure an efficient outcome in all types of enquiries, disputes or tax disclosures with HMRC. To find out how we can help, get in touch with Danielle Ford, Partner and Head of Tax Disputes & Resolutions, or Riocard Hoye, Senior Manager.
