Guidance for practitioners whose clients receive a letter, including AML obligations
HMRC's One to Many (OTM) letters for non-submission of tax returns are a key tool in the tax authority's communication strategy. These letters serve to convey standard messages to multiple taxpayers simultaneously, with the primary goal of influencing taxpayer behaviour and encouraging compliance with tax obligations.
In the specific case of non-submission, HMRC sends OTM letters to taxpayers who have received a notice to file a self-assessment tax return but have not yet submitted it. The content of these letters typically reminds taxpayers of deadlines and requirements and may highlight potential discrepancies in the taxpayer's records.
These letters are sent directly to individuals and/or their agents if they are represented.
In some cases, HMRC targets specific groups, such as Persons of Significant Control (PSC) of limited companies.
One example is the letter aimed at those who failed to submit a personal tax return for 2022/23, another for those whose 2022/23 and/or 2023/24 personal tax returns recorded lower income levels than HMRC would have expected. Those in receipt of the first letter had until 23 August 2024 to submit a 2022/23 return; those in receipt of the second letter had until the same day to ensure those years’ tax returns are complete and accurate.
Another example is the letter aimed at those taxpayers who made a claim for Investors’ Relief in their 2022/23 tax returns. There are two letters being sent out:
Recipients are invited to amend their returns within 30 days of the letter date or face potential penalties if HMRC subsequently opens an enquiry and errors are found.
While there's no legal obligation to respond to OTM letters, they should be treated seriously. Informal requests may be forerunners to formal requests compelling the disclosure of data. Consequently, it may be sensible to comply with such requests. Recipients are typically asked to review their tax affairs and take necessary actions, such as submitting outstanding returns. These letters are part of HMRC's strategy to encourage voluntary compliance and reduce the need for more formal enforcement actions, which can be costly and time-consuming.
If a member receives one of these letters, they should first refer to the relevant guidance in the Professional Conduct in Relation to Taxation (PCRT), specifically PCRT Helpsheet D: request for data by HMRC. Paragraphs 12 to 16 of the Helpsheet will be particularly relevant in these cases – the guidance states:
Informal requests addressed to the member:
12. Disclosure in response to informal requests can only be made with the client’s permission.
13. In many instances, the client will have authorised routine disclosure of relevant data, for example, through the engagement letter. However, if there is any doubt about whether the client has authorised disclosure, the member should ask the client to approve what is to be disclosed.
14. Where an oral enquiry is made by HMRC, a member should consider asking for it to be put in writing so that a response may be agreed with the client.
15. Although there is no obligation to comply with an informal request in whole or in part, a member should advise the client whether it is in the client’s best interests to disclose such data, as lack of cooperation may have a direct impact on penalty negotiations post-enquiry.
16. Informal requests may be forerunners to formal requests compelling the disclosure of data. Consequently, it may be sensible to comply with such requests.
It's important to note that while these letters are not formal inquiries, ignoring them could potentially lead to further action from HMRC. Overall, OTM letters represent HMRC's proactive approach to tax compliance, aiming to address issues before they escalate to more serious enforcement measures.
As always, where members know of or are suspicious of any activities that amount to money laundering – including tax irregularities – which clients refuse to correct, they should refer to the guidance in the flowchart at PCRT Helpsheet C: dealing with errors in relation to the actions to be taken which may involve submitting a suspicious activity report (SAR) and/or ceasing to act.
Guidance on submitting SARs, including details of the new NCA portal, can be found in our AML hub under the Reporting Obligations tab.