Muras Matters: Offshore Income & Gains “Nudge Letters”


Over recent years HMRC has been exchanging more and more information with other countries in an attempt to identify where taxpayers have received income and gains from overseas sources but not declared them, either deliberately or accidentally.

As a result of information received from other countries HMRC are writing to taxpayers where they have reason to believe they may have received income that has not been declared on their Self–Assessment returns. We have seen a number of these letters so called “nudge letters” and would like to give a basic insight into how taxpayers should deal with a letter should one be received.


It is important to note that by sending a letter, HMRC is not immediately suggesting that a taxpayer is in the wrong or trying to evade tax; they are simply saying that their records indicate that some income or gain has arisen in an overseas country which is not immediately apparent on their tax return. It may well be that the information they have relates to an investment bond where tax may only become due once a withdrawal or surrender is made, income from a trust or overseas income that may have been disclosed on the tax return, but included as part of another amount.

On receipt of a letter, the initial step is to try and identify the potential income source and decide whether any tax may be due as a result. We recommend that taxpayers seek professional advice at this stage to ensure nothing is overlooked as this can be a complex area of taxation.

Once a decision has been made, taxpayers will need to respond to the letter by completing the certificate of tax position and confirming that either their tax affairs do not need updating, or that they do need to be brought up to date. HMRC usually gives 30 days to respond to the initial letter so time is of the essence if one of these letters is received. Please note that the 30 day limit is not to bring affairs up to date but it is merely to inform HMRC whether a disclosure is needed.

If a disclosure is required, the usual procedure is to use the on-line Worldwide Disclosure Facility (WDF), detailing the income not previously declared and any additional tax, interest and potential penalties to pay as a result.  If this facility is to be used we would again strongly recommend that professional advice is sought.

If you receive one of these letters and would like assistance in communicating with HMRC and/or bringing your affairs up to date, please contact our Tax Director, Jenny Marks.

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