We have commented in the past on some of HMRC’s poorly thought-out 'nudge' letter campaigns. These initiatives target groups of taxpayers who HMRC consider may be underpaying their taxes.
Now we have a new series of such letters – sent out in time for Christmas – on this occasion aimed at 10,000 individuals who have declared bank interest on their 2014/15 Self-Assessment tax returns.
The letters ask people to look again at the interest figures shown on tax returns with a view to checking that the declaration is correct. The letters – which have not been copied to tax agents - fall short of constituting a compliance check but will understandably cause real concern to law-abiding people who fully believe that they have disclosed everything properly.
What information does HMRC hold? What might have been overlooked? Should they contact their bank to check? And will the potential for penalties - referred to prominently in HMRC’s letter - result in them being fined if they have inadvertently done something wrong? Having raised these issues with HMRC we are told that the department has no information to suggest that the individuals targeted have missed anything off their returns – apparently it’s just a case of asking them to double-check.
There is justifiable concern over this latest example of a 'scattergun' approach to tax compliance. Indeed our telephone discussions with HMRC reveal that officers are being inundated with calls from anxious taxpayers. While it is, of course, likely that a very small number of individuals will identify that something is wrong (HMRC tell us that at least three have owned up), the vast majority – having already signed off their 2014/15 tax returns to “the best of my knowledge and belief” - will be able to confirm that they are fully compliant.
Looking ahead, we urge HMRC to think more carefully about the deeper implications of future 'nudge' campaigns. Does the department want to anger fully compliant and 'innocent' taxpayers, including old age pensioners? They may well wonder whether HMRC really is comfortable being thought of as 'Scrooge-like' and causing unnecessary stress by questioning their honesty and threatening penalties in the run up to the festive season [or at any time of the year – Ed.].
For more information please get in touch with Mike Down, or your usual RSM contact.