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November 8, 2023
By Chris Moir, Associate Director and Head of Personal Tax at RMT Accountants & Business Advisors Ltd
Along with root canal work and motorway blowouts, getting a nudge from the taxman is something that most of us will be hoping to avoid.
But for anyone with overseas assets, the likelihood of a nudge coming your way has increased significantly in the last few years – and if it does, it needs to be taken very seriously.
Since the introduction of the Common Reporting Standard in 2017, HMRC has received a huge amount of data relating to bank accounts held by people in jurisdictions around the world that are signed up to the standard.
Rather than doing the huge amount of work needed to match this data up against the tax returns of all the relevant people themselves, HMRC has instead been sending out what have come to be referred to as ‘nudge letters’ to selected individuals, which places the responsibility for ensuring that their tax affairs are up to date on those individuals, rather than on HMRC.
Receiving a letter doesn’t necessarily mean that HMRC thinks you’ve made an error on your self-assessment return, whether inadvertently or otherwise.
But with potential tax-geared penalties of up to 200 per cent of the tax due, it is beneficial for anyone who needs to make a disclosure to take steps to clarify your situation as soon as possible, with reductions in penalty rates given for those who cooperate fully.
Queries can relate to any kind of income or gains, whether through earnings, property or other assets, while cryptocurrencies have come increasingly into the spotlight over recent years due to the Capital Gains Tax that could be due on disposal.
Nudge letter recipients will be asked to complete a ‘certificate of tax position’ which confirms whether their tax affairs are up to date. If a disclosure is required, this must be completed within 90 days from the date that HMRC issue an acknowledgement of an individual’s intention to disclose.
Completing a false certificate is a criminal offence and could leave you liable to a tax investigation and/or criminal prosecution. Anyone in receipt of such a letter should immediately seek advice and support from your professional advisors.
Similarly, if you believe that your affairs may not be up-to-date, speak to your advisors in order to determine whether a voluntary disclosure may be appropriate. Penalty rates are reduced further if a declaration is made ‘un-prompted’.
For further information or advice on managing HMRC nudge letters, making a disclosure to HMRC or all other aspects of personal taxation, please contact Chris Moir at RMT Accountants & Business Advisors on 0191 256 9500 or via email@example.com.