Tax  

HMRC under fire over pre-Christmas nudge campaign

HMRC under fire over pre-Christmas nudge campaign

HMRC has been criticised by RSM for what the accountancy firm branded yet another poorly thought-out ‘nudge’ letter campaign.

The latest letter campaign targeting groups of taxpayers that HM Revenue & Customs consider may be underpaying their taxes was sent out just before Christmas to 10,000 individuals who declared bank interest on 2014 to 2015 self-assessment tax returns.

The letters asked people to look again at the interest figures shown on tax returns with a view to checking that the declaration is correct. 

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The letters – which were not copied to tax agents - fall short of constituting a compliance check but Mike Down, head of tax investigations at accountancy firm RSM, said the mail shot caused “real concern to law-abiding people who fully believe that they have disclosed everything properly.”

He said the letters prompted calls from concerned clients questioning what information HMRC had, asking what might have been overlooked and querying should they contact their bank to check their data.

Mr Down said clients called to ask what was the potential for penalties - referred to in HMRC’s letter – and will this result in them being fined if they have inadvertently done something wrong? 

Mr Down said: “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, the vast majority – having already signed off their 2014 to 2015 tax returns to ‘the best of my knowledge and belief’ - will be able to confirm that they are fully compliant.”

Looking ahead, Mr Down urged HMRC to think more carefully about the deeper implications of future ‘nudge’ campaigns. 

He said: “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.” 

In response to claims the letter campaign was a scattergun approach, an HMRC spokesperson said the tax office receives information from banks and building societies about interest received on accounts, which prompted the letters.

He said: “We have written to 10,000 customers who appear to have under-declared untaxed interest to encourage them to get their tax affairs up to date and get things right from now on. 

“We are offering help and support to do that.”