Voluntary disclosures and nudge letters

Every year HMRC gathers a vast quantity of data about UK taxpayers. There are now over 28 different official sources of information, including overseas tax authorities, banks, and other governmental agencies. HMRC also make use of third-party information from angry neighbours, overheard pub conversations and disgruntled ex-employees.

This information is analysed by HMRC’s automated digital and human risk assessment procedures which now initiates over 90% of HMRC’s enquiries.

Where HMRC has some evidence of an inaccuracy in a return but not enough to justify an investigation, they may send a ‘nudge’ letter to a taxpayer stating that they have information and asking the taxpayer to check their own affairs.

‘Nudge’ letter campaigns are too numerous to list in their entirety, but some recent ones include:

Pandora papers
Overseas assets, income or gains
Annual Tax on Enveloped Dwellings
Non-resident companies owning UK Property
Benefit In Kind
Capital Gains Tax (CGT) on residential property
Investment income
Social media stars
Landlords
Cryptoassets

What should I do if I receive a nudge letter?

Whether inaccuracies have arisen innocently or deliberately, it is always better to come forward voluntarily than to wait for HMRC to knock on the door. In the most serious circumstances, coming forward voluntarily can prevent HMRC opening a criminal investigation with a view to prosecuting and publicising individuals.

There are multiple campaigns and facilities for presenting a disclosure to HMRC, these include:

Digital disclosure service
Worldwide disclosure facility
Let property campaign
Contractual disclosure facility
Cryptoassets

If you are aware of any historic inaccuracies or receive one of these ‘nudge’ letters, then Kreston Reeves can support you settle these issues with HMRC. Our priority will be to ensure that you only pay the minimum penalty, avoid prosecution, and being publicly named and shamed.