9 August 2017
In recent weeks we have seen a flurry of activity from HMRC in the use of what are commonly termed ‘nudge letters’. These letters are sent to taxpayers using language which, at a first read, sounds as though HMRC have discovered something untoward and as though the taxpayer is now compelled to do certain things at HMRC’s instruction.
Dissecting the language dispassionately, though, it becomes clear that HMRC are making general statements about information they can gather which might be relevant to the taxpayer. Despite the section heading in bold type ‘What you need to do now’, HMRC are not exercising any statutory power and the taxpayer is not under any obligations as a result of receiving the letter.
The nudge letters we’ve most recently seen are in two distinct categories:
- Warning about the impending sharing of data between countries party to the 2018 Common Reporting Standard, suggesting the client appears to have offshore assets and suggesting that a disclosure under the Worldwide Disclosure Facility be considered.
- Noting that HMRC are collecting and interrogating data from merchant card sales providers to identify those who have potentially understated their business income, and suggesting that a disclosure under what they’ve termed the Card Transaction Programme (2).
HMRC announced the first iteration of the card transaction programme in 2013 as part of their ‘we’re closing in on tax dodgers’ campaign, entailing accusing eyes peering out of bus stop posters and similar. The process relies on their ability to use wide ranging Sch.36 powers to mass collect data which can be fed into the HMRC ‘Connect’ system to be computer cross-referenced to taxpayer records with anomalies flagged for investigation.
The programme was relaunched in March this year and these letters demonstrate some activity being undertaken.
What to do if you receive a ‘nudge’ letter
First and foremost, don’t panic. The letter might mean nothing more than HMRC have picked up your name attached to something that’s been adequately declared already.
Secondly, we’d suggest considering carefully whether you want to make the requested declaration that you have nothing to tell HMRC and your affairs are fully up to date. Whilst ignoring the letter could attract further attention from them, there’s no obligation to make any declaration and any errors subsequently found once you’ve done so are likely to bring accusations that you were less than truthful with the tax man.
We’re happy to advise taxpayers as to their own and HMRC’s respective rights and powers, and if necessary to liaise with HMRC in your best interests.
Lastly, if the letter reminds you of something you need to declare but have failed to do so, it’s better to come clean earlier rather than later and also to take professional advice rather than face the taxman unaccompanied. Again, we’re happy to advise and assist with any declarations which need to be made to HMRC.