Nudge Nudge

Jun 3, 2016 | TC blog

The Revenue believes that they can “nudge” people into abandoning claims for tax credits, writes PETER REYNOLDS of accountancy firm Dyke, Ruscoe & Hayes. Without support from a professional adviser, it might be easy for their psychological tactics to get the better of you.

Some people can work enormously hard for relatively little reward.

Imagine putting in a lot of hours as a self-employed IT consultant, for instance, but only scraping together a few thousand pounds in profit.

It can happen surprisingly easily. What if you’ve focused on markets that are in decline, perhaps? Or you’ve suffered a health problem that has impacted your results in recent years?

In those circumstances, it can often seem as if an accountant is an expense you can’t afford. It makes more sense at a lot of levels to do your own accounts and tax returns.

But what if something goes wrong?

Imagine you have been claiming Working Tax Credits, for example, while things haven’t been going so well. If a letter arrived out of the blue form the Revenue, telling you that you should return what you have been paid because your self-employed status has been disputed, how would you respond? Would you have the confidence to fight your corner?

That’s when a professional eye can be of real benefit. The chances are that you would have received one of HMRC’s “nudge” letters. They are intended to change people’s behaviour and save money at minimal cost to the governent.

Fine if you’re claiming tax credits on the back of a small eBay business, where in reality you work a few hours a week. But not if you work forty plus hours a week and just have limited profits to show for it.

It is a worry that genuine claimants can be put off asking for something to which they’re entitled, when the letter is actually aimed a rogues.

So often, it’s just a question of getting some reassurance from a professional, so that you’re not frightened off. These nudge letters have probably saved the government millions, at almost no cost. At one level, they look to be a success. But are honest tax payers losing out as a result?

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