New announcement. Learn more


News and advice to help make your property business a success

Landlords TaxProperty TaxLandlords Tax ReturnsProperty Tax ReturnProperty AccountsLandlords AccountsTax ReturnsChartered AccountantsOnline AccountantOnline BookkeepingOnline Tax ReturnsYour Online AccountantYour Online BookkeeperBusinessadviceAccountingTaxCashflowProperty AccountantSmallbusinessBusinesstipsTaxplanningVATCgtFurnished Holiday LettingsInheritance TaxLandlords AccountantPropertyProperty bookkeeperTaxreturnAnnual Exempt AmountBusiness RateCapital AllowancesCapital gains tax propertyComplianceDeductibleexpensesDisincorporationEmployment AllowanceFinanceFinancialmanagementHoliday Lets TaxLandlords FinancialMaking Tax DigitalMakingTaxDigitalMileage AllowanceMobilephonesOverlapreliefPensionPprProperty Company TaxProperty Tax Deductible ExpensesPropertyallowanceRent a Room ReliefSDLTSmall BusinessTimetoPayVAT invoice60 day capital gains limitAbolitionclass2AccrualsbasisAcquisitionsAdvisoryfuelratesAIAirBnBAllowable Business ExpensesAlphabet sharesAmapAnnual Tax on Enveloped DwellingsAppealArtificial intelligenceAssessmentAsset disposalAssociated CompanyAssociated Company Tax RulesAutumnstatementBad DebtBad Debt Tax ReliefBaddebtsBadgesoftradeBeancounterBenefits in KindBreakeven PointBudgetBusiness adviceBusiness asset defermentBusiness coachBusiness ContinuityBusiness EntertainmentBusiness ExpensesBusiness Rates ReliefBusiness tipsBusinessgrowthBusinesstypesBuy or Lease EquipmentBuytoletCapital Allowances for CarsCapitalallowancesCapitalexpenditureCar Capital AllowancesCarry Back LossesCashbasisChange of Tax BasisChatGPTCIS SchemeCommon TenantCompanies ExpenditureCompanies HouseCompany Account DeadlinesCompany Account FilingCompany Strike OffCompany Tax Efficient PropertyCompanyassociationCompanyloanstaxfreeCompulsory Strike OffConstruction Industry SchemeContacthmrcContentmarketingCorporation Tax LossesCorporation Tax New RegimeCorporation Tax RatesCorporationTaxCostsCryptocurrencyCustomerlistimplicationsDeductible Business ExpensesDepreciationDevelopmentDirectorsDirectors LoansDirectorsloansDisallowable Business ExpensesDiscoveryDividend allowanceDividend Allowance ReductionDividend PlanningDividendallowanceDividendsDLADomestic Items Tax ReliefDormantcompanyEmployee DiscountEmployee managementEmployeecompensationpaymentsEmployeeOwnershipTrustEndoflifeplanningEnquiryEnterpriseResourcePlanningEntrepreneurmindsetEquityExpensesExpenses Allowed For TaxExtrabenefitEyetestsFHLsFlippingFurnished Holiday Lets TaxGift AidGiftsGrowthhacksHelp to pay tax billsHICBCHMO Licensing FeesHMRC complaintsHoldoverreliefHoliday Lettings TaxHow to apply for a Business LoanHow to Extract ProfitHumourHybridIhtexemptionsIllegaldividendsInfluencersInheritance Tax Nil Rate BandInterestreliefInterestrestrictionInvestment Property TaxJoint TenantKeypersoninsuranceLandlord RepairsLandlords Self AssessmentLate vat registrationLBTTLeadgenerationLeadmagnetLeanbusinessmodelLetting Agent DisbursementsLetting Agent RecharresLettings ReliefLimitedcompanyLoaninterestLong Lets TaxLongserviceLTTMainresidencereliefManaged LetsManagement accountingMaritalhomedivorceMarriage allowanceMarriageallowanceMileage paymentMinimumwageMixedusesdltMortgage costsMortgage Interest ReliefNew propertyNewcompanycarfuelratesNewnicrulesNIC 2023 to 2024NIC savingsNicdisregardNicreductionNMWNmwerrorsNon-taxableNudgeletterOptiontotaxvatOverpayment ReliefPaperformPartnershipPartnershipbusinessesParttimePatternofoccupancyPAYEPAYE by Direct DebitPayrollingPenaltypointsPension Payments Tax ReliefPensioncontributionsPensionsPerformance-reviewsPeriodofgracePeriodsofabsencePersonal financePersonalallowancePersonalguaranteesPostcessationreliefPretradingexpensesProfitProfit-and-lossProfitAndLossProperty AllowanceProperty Development CompanyProperty IncorporationProperty Investment CompanyProperty investor accountsProperty investor tax tipsProperty LettingProperty Rental BusinessProperty TradingPropertycompanyRecharges by Estate AgentsRegularpaymentsReimbursedexpensesRent your driveRentalRentaroomResearch & DevolopmentResidence ReliefResidential property gainsResidentialsdltRetail stock controlRetainedprofitsRevenueRoom for rent taxRtiSASalarySDLT changesSection 455 TaxSection455taxSelective Licences LandlordsSelf AssessmentSelf-employednicSelfemployedSeperationServicechargesSettlementslegislationSimplified ExpensesSmallbizSmallbusinessratereliefSoftwareSpring BudgetStaffpartiesStamp dutySuccessJourneyTax Allowance on DrivewaysTax AllowancesTax DeadlinesTax Filing DeadlinesTax Free ChildcareTax free incomeTax on Company VansTax positionTax ReliefTax tips for landlordsTaxbillpaymentsTaxconsequencesTaxincentivesTaxpositionTaxpositionassetsTaxreliefTaxreliefsTaxsesTerminationpaymentsTipsTrade professionalTransfer AssetsTransfer Assets Between SpousesUmbrellacompanyUndisclosedincomeUnpaid RentVAT Bad Debt ReliefVAT DeadlinesVAT DisbursementsVAT PenaltiesVAT registrationVatpenaltiesVatregisteredVatregistrationthresholdWellbeing

What to do if you receive one of HMRC's 'nudge’ letters

What to do if you receive one of HMRC's 'nudge’ letters

HMRC believes that not everyone is paying the correct amount of tax, estimating what it terms as 'the tax gap' as being '4.8% of total theoretical tax liabilities, or £35.8 billion in absolute terms, in the 2021 to 2022 tax year'. HMRC appreciates that not all this money is purposely withheld (as in fraud or tax evasion) but rather through mistakes or misunderstandings of the tax law.

As such, HMRC has been on a mission to rectify this situation by first undertaking several 'campaigns'. In 2007, HMRC announced a series of such campaigns designed to give taxpayers the opportunity to get in touch voluntarily to bring their tax affairs up to date, including non-declaration of income on advantageous terms – no questions asked. The campaigns targeted a specific taxpayer group or taxable activity type and were intended to be 'one-offs'. Fast-forward to this month and the only campaign remaining targets non-declaration of income from let property; HMRC obviously believes the property tax campaign has more to go and as such remains in place (although it is still possible for anyone who wishes to come forward and declare any previously undisclosed income voluntarily).

The current lack of 'campaigns' is possibly because there are more data collection sources available to HMRC enabling more accurate 'cross-checking' of information declared. HMRC's computer system can identify more accurately where anomalies may lie within an individual’s tax affairs and provides the informational basis for a letter to be issued. Such letters are an inexpensive way for HMRC to follow up without opening a formal tax investigation.

HMRC is also using information received to segment its 'customers' into groups to take what they term 'taking targeted action to tackle avoidance, evasion and criminal activity' and issue 'nudge’ letters. Letters are typically sent out enmasse as a campaign and relate to specific areas of tax, such as overseas income or the disposal of property. The intention is to prompt customers to review their tax returns to check whether they need to notify HMRC of any further gains, income or profits yet to be disclosed. The letter does not state what is missing from the return, but it is supposedly designed to nudge the taxpayer to review and correct the return where necessary. HMRC calls these 'one to many' letters and they are automatically generated by their Connect computer system. Therefore, the onus is placed on the taxpayer to investigate the issue and take any action required.

The letter is accompanied by a Certificate of Tax Position, the recipient having 30 days to respond otherwise HMRC may take the discovery route with the potential for penalties or even criminal prosecution. HMRC has agreed that they will accept a response by letter as an alternative should an individual choose not to complete the declaration.

The most recent set of letters has been issued to individuals who incorporated their property business in 2017/18 and applied incorporation relief on the transfer, for capital gains tax (CGT) purposes. The letters are targeted at those taxpayers who declared a disposal of their property interests but paid no CGT due to the application of incorporation relief. The letters state that HMRC believes an excessive amount of incorporation relief may have been applied and advises recipients to check the position. If an error is identified, the recipient is invited to contact HMRC via a specific email address. Where it is believed that the tax return submitted is correct, taxpayers are advised to confirm this with HMRC by email, providing a calculation of the relief available and details of the consideration received on incorporation. HMRC also states that it may seek to raise a discovery assessment if no response is received within 30 days of the date on the letter.