RPC, the City law firm, has stated that HMRC is increasingly using ‘nudge’ letters to circumvent the normal dispute resolution process and put pressure on individuals currently engaged in a dispute with HMRC.
The nudge letters are sent directly to taxpayers involved in disputes with HMRC, using behavioural psychology to subconsciously nudge taxpayers to settle their disputes. Normally, HMRC would send correspondence to the lawyer or accountant appointed by the taxpayer to represent them.
RPC says that the sending of ‘nudge’ letters directly to clients in any other area of litigation would be seen as applying undue pressure.
Adam Craggs, Partner and Head of RPC’s Tax Disputes team, is quoted by The Economic Voice:
“HMRC believe that by placing pressure directly on taxpayers engaged in a dispute they can force them to pull out and settle.This is a shoddy practice, and one that needs to be investigated by whatever authority allegedly exercises oversight over HMRC, eg PAC.
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.
If a financial services business was found to be using a similar tactic, it is likely the FCA would be knocking very firmly on that business’s door.
If HMRC are confident of their technical arguments, they have nothing to fear from the dispute resolution process and do not need to spend taxpayers’ money on behavioural scientists to ‘nudge’ taxpayers to abandon their appeals.”
Tax does have to be taxing.
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