Taxpayers across the UK are being sent letters by HM Revenue & Customs (HMRC) encouraging them to declare tax.
Receiving any form of communication from HMRC can be nerve-racking and many people are clearly unsure what they should do initially.
Who is HMRC targeting?
There are many reasons why HMRC may issue a nudge letter to a taxpayer, but a large number of these communications has been due to HMRC obtaining information that suggests that a taxpayer may have offshore income or gains.
It may also be due to believing that there is a risk that an individual may not have paid the remittance basis charge, which is a flat rate tax charge on overseas income and gains for certain qualifying individuals living but not domiciled in the UK.
Often HMRC will not stipulate within the letter which tax year they believe the income or gains were realised and the query could, in fact, relate to multiple tax years and many different assets.
This can clearly leave many people confused and in fear of a large tax bill or penalty, especially if they do not have previous experience with HMRC.
First steps
Whilst it is important to act quickly on the letter you receive, there is no immediate cause for panic. HMRC has indicated that there are various reasons that taxpayers may be contacted, including, but not limited to:
- Discrepancies in the data received from overseas tax authorities
- Changes to the individual personal circumstances or tax laws
- New information supplied to HMRC that requires clarification.
HMRC typically gives taxpayers 30 days to respond to a letter it has sent out before it begins to take any action, although in some cases it may ask for a person to respond sooner rather than later.
If it is not possible to respond in this timescale HMRC may offer an extension if one is requested early enough, but this will depend on the circumstances of each individual.
Next steps
If you receive a HMRC nudge letter you should seek help from a tax adviser at the earliest opportunity.
They can assess the purpose of the letter and communicate with HMRC about what it requires and the options open to the taxpayer if tax is due.
In some cases, taxpayers that have undeclared overseas income and gains may be able to use the Worldwide Disclosure Facility, which provides a structured process for disclosing overseas income and gains.
Depending on the circumstances, you may be able to reduce the penalty you pay and take advantage of double tax agreements to reduce the tax payable in the UK.
Having a trusted adviser by your side, that has a deeper understanding of the way HMRC works, can not only reduce the burden of making a disclosure, but it can also reduce the time it takes and the costs involved in many circumstances.
How we can help
It is important that if you receive a nudge letter from HMRC that you contact us at the earliest opportunity so that we can assist you in your response to the tax authority.
Grunberg & Co has a long history of working with clients on complex tax disputes and has an award-winning reputation for achieving successful outcomes for taxpayers.
To find out more about our tax advice and investigation services, please contact Nimesh Patel by calling 020 8458 0083 or emailing nimeshp@grunberg.je-hosting.co.uk
