These ‘nudge letters’ do not open a formal tax enquiry or compliance check into the taxpayer’s affairs, they just suggest that the taxpayer should review the pay and/or benefits figures on their tax return and make any amendments to the return as necessary.
If your our client receives such a nudge letter, we should also receive a copy.
As the errors have arisen from the payroll reporting it is quite likely that the mistake was made by the employer in the RTI returns or P11ds submitted, and different figures were reported to the taxpayer or the P60 or P45. Alternatively, the taxpayer may have omitted an employment completely.
In cases where a tax agent has a number of clients that have payroll data discrepancies on their tax returns, the agent will be invited to telephone HMRC directly to discuss the issues that affect their clients. The agent will be provided with a list of the clients, including their UTR numbers, which HMRC believes have incorrectly reported PAYE data or P11d data (or both).
Frustratingly HMRC does not disclose in the nudge letter what the exact problem is, only that it relates to the 2019/20 tax return. The taxpayer is invited to check that they have included all of their pay and/or taxable benefits from different sources. If there is something missing the taxpayer is asked to correct the error online through the HMRC self-assessment service, and is given a deadline to do this.
This deadline is not a statutory deadline, so it can’t be enforced, but the HMRC letter should not be ignored as that could lead to a formal tax enquiry being opened.
Written by the Tax Advice Network