Nudge letters and the certificate of tax position

HMRC sends large numbers of letters each year that are neither routine nor formal. They are known as nudge letters, or in HMRC’s own language “one to many” letters, because the same letter goes to everyone HMRC’s data places in a particular group. They are prompted by information HMRC has received — about overseas accounts, rental income, cryptoassets, online selling or company profits — which suggests that some recipients may have tax to put right.

This guide explains what these letters are, what they are not, and the particular care needed where a letter includes a certificate of tax position.

What a nudge letter is — and is not

A nudge letter typically says that HMRC has information suggesting you may have a particular kind of income or asset, reminds you of your obligation to declare it, and invites you to check your returns and correct anything that is missing. It usually gives a date by which HMRC would like a response.

It is not:

• a formal enquiry into a return under section 9A of the Taxes Management Act 1970
• an information notice under Schedule 36 to the Finance Act 2008
• an assessment or a penalty
• an accusation that anything is wrong

Many recipients have nothing to correct. The data behind these letters is broad by design: an overseas account that has always been declared, or income that is below any taxable threshold, can produce the same letter.

Do you have to reply?

A nudge letter does not usually impose a legal obligation to reply in the way a formal notice does. But that is a narrower point than it sounds.

• HMRC has the data that prompted the letter. If the return is wrong, the letter changes nothing about the underlying liability.
• If there is no response, HMRC can follow up with a formal enquiry, an information notice or a discovery assessment, each of which does carry obligations and deadlines.
• A disclosure made after a letter about the same matter is likely to be treated as prompted, which sits in a higher penalty range than an unprompted one. The letter itself can therefore change the penalty position even though it is not a formal step.

So the useful question is not “must I reply?” but “is my position actually right?” — and the answer to that decides what, if anything, to send.

The certificate of tax position

Some nudge letters — particularly those about offshore income and assets — enclose a certificate of tax position and ask the recipient to sign and return it. The certificate is a declaration, typically that the recipient has declared all their income and gains, or all their offshore income and gains, and has no further tax to pay.

Signing is voluntary

There is no legal requirement to sign a certificate of tax position. HMRC’s letters generally present it as optional, and not signing it is not, in itself, an admission of anything.

Why it should not be signed casually

A signed certificate is a statement made to HMRC. If it later proves to be untrue, it can be treated as evidence about the signatory’s behaviour — and HMRC’s view of behaviour decides both the penalty range and how many years it can go back. A certificate signed in the belief that everything was in order, when it was not, can make a careless error look deliberate. At the serious end, a knowingly false declaration to HMRC can have consequences well beyond a penalty.

That does not mean the certificate should never be signed. Where someone is genuinely confident their position is complete and correct, signing it can be a reasonable way to close the matter. The point is that it should be signed only after the position has been checked, not as a reflex to make the letter go away.

The realistic options

Faced with a nudge letter, there are broadly three responses:

1. The position is already correct. You can tell HMRC so, briefly, and explain why — for example that the account in question has been declared, or that the income is covered by an exemption. Signing the certificate, if one is enclosed, is an option at this point.
2. Something needs correcting. The correction should be made through the right route — usually HMRC’s Digital Disclosure Service, the Worldwide Disclosure Facility for offshore matters, or the Let Property Campaign for rental income — covering all the years that are open. See voluntary disclosures and the Let Property Campaign.
3. You do not yet know. Then the first job is to find out, before saying anything to HMRC that commits you to a position. Asking for a little more time is usually better than a hurried answer.

Our guide to how far back HMRC can investigate explains how many years a correction is likely to need to cover, and our guide to HMRC crypto letters covers the cryptoasset versions of these letters.

If the letter turns out to be something else

Not every letter that feels like a nudge is one. If the letter cites a section of legislation, sets a statutory deadline, or asks for specific documents, it is more likely to be a formal enquiry or an information notice. See identifying your HMRC letter, or contact us with a photo of page one.

Sources

• HMRC, “one to many” campaign letters and the associated certificates of tax position (GOV.UK and HMRC Compliance Handbook)
• Taxes Management Act 1970, section 9A and section 29; Finance Act 2008, Schedule 36
• Finance Act 2007, Schedule 24 (penalties for errors, including the prompted and unprompted distinction)

This guide is general information, not advice on any particular case.