Tax Disputes & Resolutions Round Up: April-June 2023

Nudge letters

HMRC are continuing their nudge letter campaigns. Nudge letters are a cost-effective solution for HMRC to communicate with many taxpayers at once. They allow HMRC to gather potential loss of tax that it has identified. Nudge letters usually state that HMRC holds information on the taxpayer and are used to encourage taxpayers to review their tax affairs.

There are many topics HMRC are targeting regarding nudge letters; some of the recent letters include:

• Annual Tax on Enveloped Dwellings (ATED)
• Research and Development (R&D)
• Electronic Sales Suppression (ESS)
• Crypto

HMRC investigating taxpayers named in the ‘Pandora Papers’

First leaked in 2021, the ‘Pandora Papers’ were 12 million documents, allegedly involving offshore deals and transactions to conceal wealth. HMRC has started issuing letters to some of the taxpayers named in the papers and they have 30 days to respond to the letter. Read more here.

Online earning platforms

As part of the HMRCs latest attempts to keep up with the rapid expansion of the digital economy, HMRC is writing to online content creators who make money or receive gifts for posting material on platforms such as Instagram, TikTok and YouTube. Online marketplaces will now need to submit the income of sellers using their platforms to the resident tax authority, and self-employed individuals will need to supply the same information on their Self-Assessment tax return. There are concerns that this could lead to discrepancies and an enquiry by HMRC. Read more here.

Code of Practice (COP) 9

Code of Practice 9 is HMRC’s most serious civil investigation type which carries an allegation by HMRC of fraud or deliberate behaviour. COP9 is one step away from criminal prosecution and is seen as the ‘last chance’ by HMRC for taxpayers to make a full disclosure and avoid criminal charges. If you receive a COP9 notice, get in touch with us immediately – these letters should not be ignored and require expert advice. HMRC published new guidance on 14 June, reinforcing their activity in this area.

Avoidance schemes

We are starting to see HMRC counter avoidance notices for ‘partner amendments’. We are aware that there are several schemes where HMRC is ready to start issuing amendments, however resourcing is an issue. If you believe your tax affairs are not in order, get in touch with us immediately to review your position and advise on your next steps. It is worth noting that by approaching HMRC to request a settlement with a TTP arrangement, it allows you to control the process. Should HMRC amend your tax returns, the tax payable will be due within 30 days.

Disclosures and enquiries – how we can help

If you have found an error or omission in your tax return, disclosing this before HMRC sends a nudge letter, or opens an enquiry, will have a more favourable outcome. It can result in the form of lower penalties, as the disclosure would be considered ‘unprompted’. If you have received a nudge letter, and then make a disclosure, HMRC will deem this as ‘prompted’, meaning potentially higher penalties. For example, a prompted penalty for an offshore omission can be as high as 200%. We can help by advising you of your next steps, preparing your disclosure, and co-operating with HMRC to achieve a favourable outcome for you.

Requirement to give security

HMRC is using the Notice of Requirement (NOR) to give security, by issuing directors with security notices for company liabilities. If you receive a notice, act immediately – there are strict deadlines to adhere to. We have a wealth of knowledge and experience negotiating Time To Pay (TTP) arrangements with HMRC for companies and their directors, and once in place, arranging for the security notice to be withdrawn. Get in touch.

Loan charge

HMRC has started to issue discovery assessments to taxpayers who it believes have not disclosed the loan charge, in their 2018/19 tax return. Discovery assessments are a formal assessment which allow HMRC to collect any loss of tax.

HMRC self-assessment phone line set to close for three months!

HMRC have recently announced that from 12 June 2023 for three months they will close their phone lines to relieve pressure and encourage taxpayers to use their online digital services.

We hope you enjoyed this edition of the Tax Disputes & Resolutions round up. You can read all of our previous insights here. If you would like further advice on anything mentioned above, or to discuss your circumstances in more detail, contact Danielle Ford, Partner & Head of Tax Disputes or Riocard Hoye, Senior Manager.