Thousands of taxpayers across the UK have received ‘nudge letters’ from HM Revenue & Customs (HMRC) encouraging them to declare unpaid tax.
The reasons for being targeted vary, but the impact of being contacted by HMRC can cause a lot of stress, leaving many taxpayers unsure about what they should do.
Who is HMRC targeting with nudge letters?
HMRC has said there are several reasons why they may issue a nudge letter to a taxpayer. However, many of these communications seem to come from HMRC obtaining information that suggests a taxpayer has overseas income or gains.
There are also concerns that some taxpayers may not have paid the remittance basis charge. (A flat-rate tax charge on overseas income and gains for qualifying individuals living but not domiciled in the UK.)
HMRC has said that its letters may not indicate what year income or gains were realised, which means their enquiries could relate to multiple tax years and more than one asset.
This lack of transparency has left many nudge letter recipients bemused.
What should you do if you receive a nudge letter?
The first thing is not to panic. HMRC may contact taxpayers because of:
- Discrepancies in the data received from overseas tax authorities;
- Changes to an individual’s circumstances or tax laws; or
- New information supplied to them that requires clarification.
HMRC typically gives taxpayers 30 days to respond to a letter before it begins to take any action. Although, in some cases, it may ask you to respond sooner.
While it is necessary to respond quickly, if you cannot provide a suitable answer within this timescale, HMRC may offer an extension if one is requested.
Who can help?
If you receive a nudge letter from HMRC, you should seek help from a tax adviser at the earliest opportunity. They can communicate with HMRC about its requirements, assess the reason for the letter and calculate what tax may be due.
In some cases, taxpayers that have undeclared overseas income and gains may use the Worldwide Disclosure Facility, which could help to reduce penalties and the tax bill.
If you have any questions, please speak with our tax experts on 020 7724 6060 today.
Link: HMRC sends ‘nudge’ letters to non-doms over unpaid tax
