As the UK Government looks to fill the black hole caused by the Covid-19 Pandemic and the current financial crisis, H M Revenue & Customs (HMRC) is now continuing to increase its enquiry activity across all areas of taxation. Whilst its main focus will remain on those they believe to be fraudsters and deliberate tax avoiders, it also needs to ensure compliance across the wider population. To do this, it is using the vast pools of information held on Connect to \u201cnudge\u201d people towards compliance by issuing standardised \u201cone to many letters\u201d to the thousands of taxpayers who appear to have made an error with their submissions and encouraging self-correction without opening a formal enquiry.\n\n\n\nThis one-to-many campaign is a cost-efficient approach for HMRC in their challenge to reduce the \u00a334bn tax gap. This method of subtly pushing people towards amending returns to achieve compliance is why they're called 'nudge' letters. They serve as an unofficial warning from HMRC that you need to ensure your clients tax affairs are in order.\n\n\n\nHMRC\u2019s computer system Connect can identify where anomalies may arise within an individual\u2019s tax return and provides the data for nudge letter campaigns. If information suggests a taxpayer has failed to complete their tax return accurately, or a potential tax loss is identified, nudge letters - and the cost of a stamp - are an inexpensive way for HMRC to follow up without opening a formal tax investigation.\n\n\n\nAreas HMRC are currently targeting amongst others are: \n\n\n\nOffshore companies with\nUK property.UK landlords.Individuals recorded as\nPersons with Significant Control at Companies' House.Euro Pacific Bank account holders.\n\n\n\nIf your client receives a nudge letter, it does not necessarily mean an error has been made, but you need to ensure that you respond correctly to HMRC on your client\u2019s behalf.\n\n\n\nIf your clients receive such a letter, the first step is to\ncheck the accuracy of what has been returned to HMRC and establish whether it\nwas correct. If after carefully reviewing your clients\u2019 affairs you are happy\nthere is nothing wrong, then notify HMRC accordingly.\n\n\n\nIf you discover an error, you should consider with your\nclient how best to put it right. This can be through disclosure, return\namendment, or simply responding to HMRC's letter. The correct approach will\ndepend on a particular campaign and your clients\u2019 circumstances. \n\n\n\nIf your client fails to reply to a \u201cnudge\u201d letter, HMRC will likely open a formal enquiry into the return, with your client having already received this \u2018warning\u2019 but deciding not to take action. If HMRC then establish that your clients return was in fact incorrect, the failure to act on the 'nudge' letter will be taken into account when considering the level of penalties. An increased penalty is never a pleasant prospect!\n\n\n\nReviewing the return and your clients\u2019 affairs on receipt of a \u201cnudge\u201d letter to establish the correct position to enable a response to a \u201cnudge\u201d letter can be costly and time consuming. \n\n\n\nAt Vantage Tax Fee Protection, we recognise this, and as a leading Tax Fee Protection provider continually reviewing and reacting to the changing HMRC landscape, we have decided to protect our accountancy practices and their clients in dealing with \u201cnudge\u201d letters. \n\n\n\nIf you would like to learn more about how our policy would react in providing cover, then please contact us and we will be happy to discuss our market-leading cover with you in detail. Please call 0116 274 9123 or email email@example.com.\n\n\n\nNot all\ninsurance policies are the same.