HMRC nudge letters cause needless worry to UK taxpayers and often achieve nothing

HMRC nudge letters cause needless worry to UK taxpayers and often achieve nothing

Thousands more nudge letters being sent out by HMRC are causing needless worry to UK taxpayers, and are unnecessary.

Robert Salter, an international tax expert at tax and advisory firm, Blick Rothenberg, said: “HMRC have sharply increased the number of ‘nudge letters’ sent to UK taxpayers in the 2022/23 UK tax year, because of international data sharing. Nudge letters increased to almost 24,000 for the year ended 5th April 2023 compared to ca. 21,000 in the previous tax year up by some 15%.”

Salter added: “The problem is that many of these nudge letters are the result of poor HMRC data analysis and create needless worry for the individuals concerned and result in unnecessary professional costs.”

Salter said: “HMRC often appears to simply take the data it receives from international sources at face value and sends out letters to taxpayers in a shotgun-like manner. It does not properly assess whether the foreign information is actually taxable in the UK, for example, or whether it has already been reported in the individual’s UK tax return declarations.”

Salter added: “Even where the income or gains apparently haven’t been reported on a UK tax return, there can be a number of perfectly legitimate reasons for this including:

  • The ‘domicile’ basis of the individual concerned – non-domiciled individuals are not automatically taxable in the UK on foreign source income or gains.
  • The differences between UK and foreign tax years; and
  • The fact that certain foreign income may not be taxable in the UK under Double Tax Agreements.”
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Salter concluded: “Whilst it is clearly correct for HMRC to use the data it receives from international data sharing agreements, to target those taxpayers who are deliberately (and illegally) concealing income and capital gains outside the UK, the Revenue should not simply be targeting taxpayers in a helter-skelter, shotgun approach.

“By simply issuing nudge letters in this pell-mell approach, the Revenue is causing needless anxiety and actually creating additional work (and costs) for taxpayers, their advisors and in many respects its own staff.”

He added: “It would be much more efficient for everyone concerned, if the Revenue did a proper analysis of the data it receives, assessing this against factors such as the information which has already been filed, a taxpayer’s domicile status and the terms of the UK’s Double Tax Agreements before issuing enquiry letters to those taxpayers with missing data.”

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