HMRC nudge letters

The implementation of the Common Reporting Standard and other data exchange regimes means that Her Majesty's Revenue and Customs (HMRC) has received, and will continue to receive, substantial information about the global tax affairs of persons with connections to the United Kingdom. This includes information about assets and income and gains generated outside the United Kingdom, which will enable HMRC to target those who may have failed to declare all of their UK tax liabilities accurately.

One way in which HMRC has been following up on the information obtained is by issuing nudge letters by post. These typically request that the recipient declares either that their UK tax affairs are in order or that they will take urgent steps to bring their affairs up to date. The letters typically request a written response within 30 days.

HMRC is still issuing nudge letters and requesting a response within 30 days, notwithstanding that recipients' circumstances may be disrupted by the COVID-19 crisis. Regardless of the current circumstances, those who receive a nudge letter must consider their reply carefully and must not ignore it. In the event that a full reply cannot be provided within 30 days due to the current exceptional circumstances, this should be explained to HMRC.

Those who receive a letter should review their circumstances and consider why they may have received it. There may be an unknown liability as a consequence of a failure to take advice or due to a misunderstanding of the complex UK tax rules. Since the deadline for the requirement to correct expired at the end of September 2018, persons with undeclared income and gains may be liable to significant penalties of up to 200% of the tax owed. It may be possible to take steps to mitigate the effect of such penalties and it is important that expert advice is taken in this respect.

For further information on this topic please contact Carole Cook, Julia Ramsden Gunduz or Robert Payne at Forsters LLP by telephone (+44 20 7863 8333) or email (carole.cook@forsters.co.uk, julia.ramsdengunduz@forsters.co.uk or robert.payne@forsters.co.uk). The Forsters LLP website can be accessed at www.forsters.co.uk.