HMRC increasingly uses standardised communications to prompt groups of taxpayers to check a particular tax risk. These are often described as nudge letters or one-to-many communications.
Receiving one should be taken seriously, but it does not automatically mean HMRC has opened a formal compliance check or concluded that your tax return is wrong.
What is an HMRC nudge letter?
HMRC describes a one-to-many approach as a standard message sent to multiple customers to influence behaviour and improve tax compliance. HMRC’s own guidance is clear that a one-to-many communication is not, by itself, a compliance check.
The letter will usually identify a topic, transaction, income source or other area HMRC wants you to consider. The exact wording matters because different letters ask for different actions.
What should you do first?
Before replying, work through the letter methodically:
- check the tax year, person or entity and issue HMRC is referring to
- note any response deadline and the action the letter asks you to take
- compare the issue with your tax return, calculations and supporting records
- do not assume HMRC’s information is complete or that a mismatch automatically means extra tax is due
- keep the letter and the evidence you used to review the position
Does a nudge letter mean HMRC thinks you have done something wrong?
Not necessarily. A nudge letter may be sent because HMRC has identified a risk pattern or information that it wants a group of taxpayers to consider. The purpose is often to encourage people to check and correct their own position where necessary.
That said, ignoring a relevant letter is rarely sensible. If there is an error, dealing with it promptly usually gives you more control over the correction and the explanation provided to HMRC.
Do you have to provide information?
This depends on the type of communication. HMRC’s one-to-many guidance says that if it asks customers to provide information voluntarily without opening a compliance check, the communication should make clear that there is no obligation to provide that information.
A formal compliance check or an information notice is different and can carry specific legal powers, obligations and appeal rights. Read the letter carefully rather than assuming every HMRC request has the same status.
What if your tax position is wrong?
If the review identifies undeclared income, an omitted gain, an incorrect claim or another error, the next step is to work out the correct figures and use the appropriate amendment or disclosure route. The right route can depend on the tax, the year, whether the return can still be amended and whether HMRC has already opened a formal check.
Do not rush into agreeing with a figure in the letter before checking the underlying records. Equally, do not delay once you know a correction is required.
When professional advice is useful
Professional advice is particularly useful where the letter involves offshore income, cryptoassets, property, capital gains, several tax years, significant amounts, or questions about whether an error was careless or deliberate. These issues can affect both the tax calculation and the way the matter should be disclosed.
If you have received an HMRC nudge letter and want the position reviewed before you respond, get in touch.
