< Go Back HMRC's nudge letters cause widespread unease Posted: Sep 23, 2015
HMRC has recently been sending numerous �nudge� letters directly to individuals
involved in tax disputes although, in our experience, this is not altogether a new or isolated phenomenon. It appears that HMRC's interest in behavioural psychology is overtly manifesting itself in their tactical approach to disputes. There is a fear that this is simply a crude attempt to intimidate or bully the vulnerable, non-represented or just ill-informed into seeing matters HMRC's way in order to achieve a settlement in HMRC's favour and thereby circumvent the usual statutory safeguards and, where applicable, the judicial process.
The tactic is believed to have originated from HMG's behavioural insights team (imaginatively called the �nudge unit�) which, in turn, has been influenced by the studies connected to data-driven behavioural economics. Headed up by a behavioural psychologist the team offers its services to several departments as well as other bodies, including the New
South Wales government in Australia.
It appears that the basic theory is that
human behaviour can be influenced by many things including emotional drivers such as a need to
conform, feel shame, vanity or guilt and so by prompting or �nudging� those drivers HMRC hope to influence taxpayers engaged in a
tax dispute so they can force them to capitulate. Often letters are issued in complex cases where individuals may not have
sufficient technical knowledge to fully understand their position. In a recent statement HMRC said �We have found that those involved in tax avoidance will
sometimes not have been fully informed regarding the risks inherent in
these arrangements, 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.�
Many advisers may find that statement disingenuous as very few would allow clients to proceed into disputes and litigation without explaining all of the risks inherent in those processes. HMRC's 'nudge' letters seem to include the usual references to their 80% success rate (*) at tribunal, to bad publicity
stemming from a negative tribunal decision and remind the recipient that
HMRC is always ready to help if the they wish to resolve the dispute sooner rather than face all those dire consequences if they choose to carry on.
* This rate appears so high because most competent advisers would have already won the day or settled, if applicable, before this point leaving a disproportionate number of ill-advised, ill-prepared or unrepresented taxpayers at the mercy of HMRC'c specialist Tribunal Teams, see our
Tax Tribunal page.
We have also seen similar tactics deployed by HMRC when chasing debts; even if they are not due as in our recent