HMRC Nudge Letters – "I Didn't Know" Isn't a Defence

HMRC's debt collection efforts are ramping up, and they're affecting immigrants who believed they were complying with regulations.

We recently assisted a client who's resided in the UK for over a decade. About eight years ago, he began drawing down his South African pension – not for extravagant spending, but simply to support his parents-in-law back home.

The pension was taxed in South Africa, and the funds remained there. Like many, he assumed that was the end of the matter.

Unfortunately, HMRC had a different perspective. The Nudge Letter Arrived.

HMRC identified the South African pension through their data exchange agreements. The letter was courteous, yet firm: disclose your foreign income, or we'll proceed with our own assessment.

The issue? Under UK tax law, specifically the UK-South Africa Double Taxation Agreement (DTA), that South African pension was fully taxable in the UK, even though it had already been taxed in South Africa.

Our client was entirely unaware.

The Outcome?

Working together, we:

• Filed eight years of retrospective UK tax returns.

• Correctly applied the DTA to minimise double taxation.

• Utilised UK tax regulations to significantly reduce potential penalties.

• Saved our client approximately £50,000 compared to the initial, incorrect calculations from his previous advisor.

  
  

Most importantly, HMRC accepted the returns without dispute, penalties, or undue stress.

The Takeaway?

HMRC's latest nudge letter campaign isn't solely about tax evasion; it's also about tax awareness.

• If you've relocated to the UK, remember: your worldwide income is taxable here.

• Just because funds remain overseas doesn't mean HMRC can't access that data.

• If you receive a nudge letter, seek professional advice. It can save you significant money.

  
  

Would you like to discuss this before a letter arrives?

We're already assisting immigrants across the UK in resolving historical tax issues and maintaining compliance with HMRC.

Send us a message. Proactive measures are always more cost-effective and less stressful.

Disclaimer: The information provided in this blog post is for general guidance only and does not constitute professional tax advice. Individual circumstances vary, and specific advice should be sought from a qualified tax advisor.