HMRC increasingly writes to whole groups of taxpayers at once, inviting each to check that their affairs are in order. These nudge letters are usually issued in instances where HMRC considers there is wide-spread non-compliance. They cost HMRC little to send but an ill-thought out answer can cost the recipient a great deal.
A nudge letter is not an enquiry. It usually carries no formal demand. That tempts some people to bin it and others to fire back an anxious reply. Both reactions carry risk.
Begin with a proper review. Look closely at whatever area the letter targets and test the relevant returns, year by year.
If everything is correct, a short and confident response may be enough; in some cases, no response is needed at all. Take advice on which applies.
If something is wrong, slow down. A hurried letter that admits a problem without explaining it helps nobody. Work out what the error is, how it arose, which years it touches and how it will be put right. Then choose the best route to correct it, whether an amended return or a formal disclosure.
Why such care? Because the way a problem comes to light shapes what happens next. A clear, complete correction made on the taxpayer’s own initiative generally leaves them in a far stronger position on HMRC’s assessing powers and penalties than one extracted later under pressure. It also hands the taxpayer some control over the sequence of events.