HMRC has started issuing nudge letters to offshore companies owning UK property who they believe may have an outstanding liability to UK tax. Recipients are asked to complete an enclosed ‘certificate of tax position’ (and, where a disclosure may be required, a ‘notice of intention’). Nudge letters are not randomly generated and should not be ignored. All recipients, even those confident of their position, should seek appropriate professional advice as soon as possible before returning these documents to HMRC or taking any further action.
Background
HMRC has recently launched several new nudge letter campaigns on various issues, including a campaign aimed at tackling non-compliance linked to offshore corporates owning UK property.
Two types of letters are being issued as part of this campaign:
In each case, recipients are asked to consider whether they need to make a disclosure and to complete an enclosed ‘certificate of tax position’ with one of the following responses:
Importantly, the certificate must be signed with a declaration that the information provided is correct and complete. If the company is making a disclosure of outstanding UK tax liabilities, a ‘notice of intention’ must also be completed (containing information about the disclosure, the person completing the notice and the relevant company).
The nudge letter states that the completed certificate (and, where applicable, the completed notice) must be returned to HMRC within a specified time frame (typically 40 days).
Targeting taxpayers
The behavioural science of ‘nudge theory’ has become an increasingly used weapon in HMRC’s arsenal over the last decade or so, i.e. the idea that people can be better directed towards a desired course of action through suggestion rather than obligation. Individual UK taxpayers may have noticed the same concept at work when completing their online tax returns, where certain information is now pre-populated based on figures held by HMRC (the aim being that the taxpayer will likely accept those figures by default).
Nudge letters are rarely sent at random. Whilst nudge letters do not make specific accusations and are rarely overly threatening in tone (in this case, giving recipients various options to select), the letters are generally based on actual data held by HMRC. Recipients should not be fooled into thinking this is a simple tick-box exercise. All recipients of these letters, even those confident of their tax position, should therefore seek appropriate professional advice as soon as possible.
Certificates of tax position and notices of intention
Despite the language used in the nudge letters, there is no statutory basis for either the ‘certificate of tax position’ or ‘notice of intention’ (which we have also seen used in other nudge letter campaigns). There is, therefore, no legal requirement to complete either document.
Certainly, neither document should be submitted to HMRC without seeking appropriate professional advice: doing so on the basis of incorrect information could lead to higher penalties being imposed or even criminal prosecution (and note there is no de minimis below which errors do not need to be disclosed). Given the serious potential implications of making a false declaration, it may be more appropriate to provide a response by way of detailed letter from your professional adviser or using an established HMRC disclosure facility.
However, it would also be inadvisable to simply ignore the letters. Failure to take action is likely to mean that there is an imminent risk of HMRC issuing an assessment or opening an investigation (either under civil procedures or, in cases of suspected fraud, using their criminal powers). If there are outstanding tax liabilities, a failure to respond will also likely lead to HMRC seeking higher penalties (potentially up to 200% of the tax due).
HMRC has started issuing nudge letters to offshore companies owning UK property who they believe may have an outstanding liability to UK tax. Recipients are asked to complete an enclosed ‘certificate of tax position’ (and, where a disclosure may be required, a ‘notice of intention’). Nudge letters are not randomly generated and should not be ignored. All recipients, even those confident of their position, should seek appropriate professional advice as soon as possible before returning these documents to HMRC or taking any further action.
Background
HMRC has recently launched several new nudge letter campaigns on various issues, including a campaign aimed at tackling non-compliance linked to offshore corporates owning UK property.
Two types of letters are being issued as part of this campaign:
In each case, recipients are asked to consider whether they need to make a disclosure and to complete an enclosed ‘certificate of tax position’ with one of the following responses:
Importantly, the certificate must be signed with a declaration that the information provided is correct and complete. If the company is making a disclosure of outstanding UK tax liabilities, a ‘notice of intention’ must also be completed (containing information about the disclosure, the person completing the notice and the relevant company).
The nudge letter states that the completed certificate (and, where applicable, the completed notice) must be returned to HMRC within a specified time frame (typically 40 days).
Targeting taxpayers
The behavioural science of ‘nudge theory’ has become an increasingly used weapon in HMRC’s arsenal over the last decade or so, i.e. the idea that people can be better directed towards a desired course of action through suggestion rather than obligation. Individual UK taxpayers may have noticed the same concept at work when completing their online tax returns, where certain information is now pre-populated based on figures held by HMRC (the aim being that the taxpayer will likely accept those figures by default).
Nudge letters are rarely sent at random. Whilst nudge letters do not make specific accusations and are rarely overly threatening in tone (in this case, giving recipients various options to select), the letters are generally based on actual data held by HMRC. Recipients should not be fooled into thinking this is a simple tick-box exercise. All recipients of these letters, even those confident of their tax position, should therefore seek appropriate professional advice as soon as possible.
Certificates of tax position and notices of intention
Despite the language used in the nudge letters, there is no statutory basis for either the ‘certificate of tax position’ or ‘notice of intention’ (which we have also seen used in other nudge letter campaigns). There is, therefore, no legal requirement to complete either document.
Certainly, neither document should be submitted to HMRC without seeking appropriate professional advice: doing so on the basis of incorrect information could lead to higher penalties being imposed or even criminal prosecution (and note there is no de minimis below which errors do not need to be disclosed). Given the serious potential implications of making a false declaration, it may be more appropriate to provide a response by way of detailed letter from your professional adviser or using an established HMRC disclosure facility.
However, it would also be inadvisable to simply ignore the letters. Failure to take action is likely to mean that there is an imminent risk of HMRC issuing an assessment or opening an investigation (either under civil procedures or, in cases of suspected fraud, using their criminal powers). If there are outstanding tax liabilities, a failure to respond will also likely lead to HMRC seeking higher penalties (potentially up to 200% of the tax due).