Mishcon de Reya page structure
Site header
Main menu
Main content section
HMRC paper

Pandora Papers – HMRC commence compliance checks with "nudge letters"

Posted on 15 June 2023

Beginning in October 2021, the International Consortium of Investigative Journalists released information which it obtained from companies which specialise in creating offshore companies and trusts

HMRC have recently initiated compliance checks into taxpayers named in the Pandora Papers by issuing letters asking them to review their tax affairs and, where necessary, to bring them up to date.

It is inferred from the size of the dataset (c. 2.94TB of data) and the passage of time since the leak, that HMRC have reviewed the papers and are now writing to persons whom they suspect may have additional tax liabilities to disclose. It is understood that HMRC have set up a dedicated team to handle queries arising from these initial letters which are often referred to as "nudge letters".

On receipt of a nudge letter, taxpayers have 30 days to check their tax position and revert to HMRC. As set out in our previous article, HMRC may levy penalties for a taxpayer's failure to disclose any shortfall in tax due to HMRC. Given that the Pandora Papers leak pertains to offshore matters, HMRC may levy penalties of up to 200% of any tax which is found to be due once they have completed their compliance check into a taxpayer's affairs.

Acting quickly to make a full, unprompted voluntary disclosure before HMRC asks questions should reduce any tax-geared penalties due, mitigate late payment interest and avoid an extensive enquiry or complex investigation.  If you consider that you need to make a disclosure to HRMC, it is strongly recommended that you engage a professional advisor without delay.

This is especially the case if HMRC consider that a failure to disclose amounts to dishonest behaviour on the part of the taxpayer. In those circumstances, HMRC may seek to bring criminal proceedings against the taxpayer. Where deliberate behaviour or fraud is suspected, the Contractual Disclosure Facility (CDF), otherwise known as Code of Practice 9 (COP9), should be utilised.

By making a disclosure to HMRC under the CDF, the taxpayer is afforded protection from criminal prosecution for tax offences as long they make a complete and accurate disclosure of all deliberate behaviour and HMRC accepts them into CDF process.

Further, the actual rate of penalty charged will depend on the quality of engagement with HMRC during the investigation.

Through timely and proactive engagement with HMRC, it is often possible to achieve a less intrusive investigation and a more favourable resolution of the penalty position. Contact a member of the team should you require assistance.

How can we help you?

How can we help you?

Subscribe: I'd like to keep in touch

If your enquiry is urgent please call +44 20 3321 7000

Crisis Hotline

I'm a client

I'm looking for advice

Something else