03 October 2019

What are my obligations with this nudge letter?

Jeff Millington
Private Client Tax Director | UK

HMRC has entered into a programme of issuing what are called ‘nudge letters’ to UK taxpayers. These explain that HMRC is aware that the individual has assets overseas and invariably asks the individual to confirm if the income from these assets is declared and also usually asks the individual to confirm this by signing a declaration in writing.

There is no requirement on the individual to sign the declaration and in fact we would advise against this.

Over the last few years HMRC have been receiving information on UK taxpayers from overseas authorities. The Common Reporting Standard (CRS) is an agreement which allows countries to enter into an automatic exchange of information with each other. The first exchange was in 2017, with further countries agreeing to exchange in 2018. There are now up to 109 countries who are either exchanging information or are committed to do so by 2020.

As a result of these agreements, and other agreements the UK has entered into, HMRC has received financial information on millions of individuals in the UK and will use its computer system Connect to sift through this information.

HMRC are not checking the individual’s tax return before sending nudge letters and we have seen a number of people with bank accounts overseas, from which the income and gains are filed on their UK tax return, receive such letters.

This might lead you to feel comfortable in signing the declaration from HMRC. However, we consider that a better approach is for the adviser to write to HMRC to confirm that the individual files their overseas taxable income on their tax return and it is the advisers’ policy for clients not to sign declarations to HMRC where there is no requirement.

Responding to so-called nudge letters in this way will ensure that tax payers are not inadvertently making an incorrect declaration to HMRC if, for example, an offshore structure is technically, and outside the knowledge of the taxpayer, no longer 100% compliant following a change in the law.

We would therefore always recommend the individual seek the advice of an experienced adviser in this particular area.

Jeff Millington Private Client Tax Director | London

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