When you get nudged do you push back or say you’re sorry?

January 4, 2022

When you get nudged do you push back or say you’re sorry?


When you get nudged do you push back or say you’re sorry?

People’s reactions to being nudged or jostled in the street vary a lot but there are essentially two kinds of reaction, either to puff up your chest and push back or to retreat as soon as possible and say sorry.

Why then are our reactions often different when you are nudged by HMRC?

In the past few years HMRC have adopted a new approach to promoting the proper compliance with tax legislation – the nudge letter. If you receive such a letter, you have been nudged!

For most taxpayers getting a letter from HMRC is intimidating enough but nudge letters come out of the blue and on first reading would suggest to most taxpayers that HMRC have found something wrong with your taxes. However, if HMRC believed your tax returns were wrong you would get a specific enquiry letter not a nudge letter.

Nudge letters are targeted towards taxpayers based on information HMRC holds either from tax returns or third-party sources that suggest there might be a compliance risk – they are not an indication that HMRC has made an assessment of an individual or company and considers there is high risk of a compliance failure.

In recent years we have seen nudge letters in the following areas: –

  • Undisclosed overseas income or gains.
  • Undisclosed loan charge liabilities.
  • Excessive research and development claims (R&D).
  • Changes to interest deductions on buy to let properties.

The common theme of all nudge letters is that they are all in areas of concern to HMRC and usually where there are changes to tax law.

So what do you do when you get a nudge letter? Our advice is not to ignore the letter but to review your compliance and to consider responding to the letter whether or not an error is discovered.

If there is an error or omission on your tax return you will significantly mitigate any penalties that may be due if you make a disclosure before HMRC enquires formally into your tax returns even when you are prompted to disclose as a result of receiving a nudge letter.

To discuss this further, or should you have any queries, please don’t hesitate to reach out to your Barnes Roffe contact partner.

We believe we are more than just your average accountancy firm. Our goal at Barnes Roffe is to engage our clients through a proactive relationship, which provides you with the resources and tools you need to enable you to take charge of your finances with confidence.

Tax news, audit news and any new accounting news ... with the help of our topical tips, blogs and key guides you can enjoy the benefit of being regularly informed of business and accounting updates which are likely to be relevant to you and your business.

PLEASE NOTE: By the very nature of this type of information the details of tax law might have changed since they were published, so contact your Barnes Roffe partner before acting on any matter contained in these documents.