If you have undeclared income or gains, it is always better to tell HMRC about it before they contact you.  Voluntarily disclosing omitted income and gains generally leads to more favourable treatment and lower penalties, compared to when corrections are prompted by HMRC contacting you.

HMRC periodically issue ‘nudge’ letters to targeted groups of taxpayers asking them to check their Tax Returns – these letters are usually based on information received from other sources (such as letting agents, Land Registry and retail sites such as Amazon, eBay and Etsy – as well as high-profile leaks such as the Panama Papers).  HMRC use this data to compile networks and spending patterns to detect and pursue underpaid tax.

Recently HMRC have issued targeted letters to those who may have forgotten to report rental income, sales of goods on online platforms and income/gains generated by assets held overseas.  In the last month HMRC have been writing to company shareholders where the accounts show that dividends/distributions have been made but not reported on shareholder’s Tax Returns.  Sometimes the ‘nudge’ letters can be vague and may not specify the source of the information held by HMRC. 

If you receive a letter from HMRC asking you to check your tax, please do not to ignore it. 

Receiving a ‘nudge’ letter from HMRC does not necessarily mean there is an error.  There may be a reasonable explanation as to why the income or gains have not been reported.  We have seen letters issued to taxpayers simply because they have a property or a bank account overseas; despite no income being generated.  Another example of a letter we’ve seen recently is HMRC asking for more information around property expenses.  However, where it is known that tax has been underpaid, HMRC do prompt individuals to seek professional advice. 

Please don’t bury your head in the sand!

If you do not respond to HMRC’s letter, they may pursue the matter and, in some cases, open an enquiry which is costlier and more time consuming to deal with.  

At CKLG, we have a wealth of experience in dealing with ‘nudge’ letters and disclosures.  We can help you review your tax position so that you understand your reporting obligations and can make an informed response to HMRC.  We can also assist with the preparation of a formal disclosure.

If you need help regularising your position with HMRC, please contact us on 01223 810100. You can also refer to our website here for more information.