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HMRC accused of sending 'nudge' letters to bypass tax disputes process

06 Oct 2015

HM Revenue & Customs (HMRC) has been accused of sending an increasing number of so-called ‘nudge’ letters to taxpayers who are involved in disputes over their tax affairs.

According to City law firm RPC, the letters being sent by HMRC’s Behavioural Insights Team are specifically designed to ‘circumvent the normal dispute resolution process’ and are being sent to the taxpayers themselves rather than to their representatives, in order to put pressure on them to settle their disputes with the taxman.

The Behavioural Insights Team was established by the Coalition government in 2010, with the aim of using behavioural psychology to target taxpayers.

Adam Craggs, partner and head of RPC's tax disputes team, said HMRC believes that by placing pressure directly on taxpayers engaged in a dispute they can force them to pull out and settle the dispute.

He added: ‘They are sending letters about often highly complex issues to individuals who do not have technical knowledge of tax issues. Not only is this a tactic designed to pressurise taxpayers into settling their dispute, it also demonstrates just how far HMRC is prepared to go in its attempt to persuade taxpayers not to pursue their dispute’.

However, HMRC denies that the letters are ‘nudge’ letters. An HMRC spokesman said the authority has found that those involved in tax avoidance will sometimes not have been fully informed regarding the risks inherent in such arrangements.

The spokesman commented: ‘In such circumstances, it can be productive to write directly to the taxpayer, to ensure that they are aware of all the options open to them. We never apply pressure and always suggest that a taxpayer should discuss the issues raised with their professional adviser’.