As most people are aware now, HMRC can obtain a lot of information from third parties, be it banks and building societies or investment providers either in the UK or overseas.

Another source of HMRC’s information comes from the land registry, where they can see properties that have been sold and by who.

HMRC’s latest attempt is assisting taxpayers in paying the correct amount of tax is by sending them “nudge letters”. The problem with these nudge letters is that the information HMRC has received on which these letters are based does not contain the full facts. For example, we have had to deal with letters where HMRC have been advised that a client holds an investment bond offshore and that it is literally it. They have no further information, such as whether any withdrawals have been made from the bond.  It is not unusual for there to be nothing to declare as the taxpayer has not taken any money out of the investment, and we have needed to advise HMRC of this.

Recently, a second round of “nudge letters” have been issued to sellers of residential property. The last time this was done was October 2020. HMRC have been using the land registry data to check up what properties have been sold and trying to tie these up with taxpayers tax returns.

As most people will be aware now, where there is a capital gain, which gives rise to a tax liability, the gain has to be reported and the tax paid over to HMRC within 60 days of completion of the sale. This was previously 30 days. This has to be done using HMRC’s Capital Gains Tax Online Property Account.  Where you are unable to use the online system, papers returns can be submitted, but the system for doing so is not as efficient as using the online service.

I can see many more “nudge letters” being issued to taxpayers in areas where HMRC envisage non compliance. However you do have to be careful in how you reply to these letters as there is no legal requirement that you have to complete the disclosure declaration that comes with them.

If you would like to discuss a “nudge letter” that you have received from HMRC, then please contact us.