HMRC tax letters for businesses: How to respond

HMRC is recruiting 5,500 new compliance officers and has set a target of £50.4 billion in compliance yield for 2025/26. A large share of that target will be met through HMRC tax letters sent directly to businesses, asking them to review specific areas of their tax affairs. If your company has received one, the next 30 days matter. A measured reply often closes the matter; a rushed or careless one can move it onto the desk of a compliance officer.

What HMRC’s nudge letters mean for your business

HMRC uses “one-to-many” letters, commonly called nudge letters, to contact large numbers of businesses at once about a specific compliance risk. These are not formal enquiries. They are data-driven prompts, generated when HMRC’s Connect system identifies a potential discrepancy between what a business has reported and what third-party data suggests.

The letters typically ask you to review your tax position in relation to a particular issue and respond within 30 days, either confirming your affairs are correct or making a disclosure. They often include a Certificate of Tax Position for you to sign and return.

This approach has become one of HMRC’s most cost-effective compliance tools. Upstream compliance activity, the category covering nudge letters, targeted questionnaires, and informal enquiries, made up 43% of HMRC’s total compliance yield in 2024/25, compared with 24% in 2019/20.

Topics HMRC is targeting in business letters

HMRC runs regular nudge letter campaigns, and the range of topics has broadened significantly. Recent and ongoing campaigns affecting businesses include:

VAT compliance in specific sectors. HMRC has written to private equity firms, construction businesses, and others about partial exemption methods, input tax recovery, and whether VAT returns accurately reflect trading activity.
R&D tax relief claims. With the merged scheme now in place from April 2024, HMRC is closely reviewing claims made under the previous SME and RDEC schemes. Letters have asked businesses to check that qualifying expenditure, subcontractor costs, and claim narratives meet the current requirements.
Corporation tax and director remuneration. HMRC cross-references Companies House data with personal tax returns to identify directors who may not have fully declared dividends or other income.
Construction Industry Scheme deductions. Contractors have been asked to verify the CIS tax status of their subcontractors and confirm they are applying the correct deductions.
Employment status and off-payroll working. Businesses engaging contractors through intermediaries continue to receive letters asking them to review their IR35 determinations.
Crypto asset reporting. Companies holding or trading digital assets are being contacted ahead of UK Cryptoasset Reporting Framework (CARF) reporting, which begins on 1 January 2026, with the first international exchanges of data due in 2027.

HMRC also contacts businesses about specific compliance risks it has identified in their sector. If your industry has been flagged for a campaign, other businesses in your sector will likely have received the same letter.

Do not sign the certificate without advice

Many nudge letters include a Certificate of Tax Position. This asks the business to confirm, in writing, that its tax affairs are correct. The certificate often covers multiple tax years and is not limited to the specific issue raised in the letter.

The Chartered Institute of Taxation has issued clear guidance to professional advisers: in most cases, it is better to respond by letter rather than completing the certificate. A carelessly completed certificate can create problems if HMRC later identifies an error, because signing it effectively confirms that the business reviewed its position and found nothing wrong. If that turns out to be incorrect, HMRC may treat the behaviour as more serious than a simple error.

Before signing anything, have your accountant review the specific area HMRC has raised and check all relevant tax years. If a disclosure is needed, there are formal channels (such as the Digital Disclosure Service) that allow you to set out your position properly and may result in lower penalties.

The difference between a nudge letter and a compliance check

A nudge letter is informal. It puts the onus on the business to review its own position. There is no statutory requirement to respond, though failing to do so may increase the risk of a formal enquiry later.

A compliance check (or enquiry) is a formal HMRC process with legal powers behind it. HMRC can require you to produce documents, attend meetings, and provide information within specified timeframes. If you receive a formal enquiry letter, you have rights and protections under the Taxes Management Act, and you should involve your accountant immediately.

The two can look similar at first glance. If you are unsure which you have received, check with your adviser before taking any action.

How to respond: A practical approach

Start by working out what HMRC is actually asking. Read the letter through twice and note the specific tax area, the tax years referenced, the deadline, and whether it is a nudge letter or a formal compliance check.

Next, pull together the records that cover the period in question. For VAT issues, that means returns, partial exemption calculations, and supporting invoices. For R&D claims, you will need your claim narrative, qualifying expenditure breakdown, and project records. Employment status queries call for contracts, working practices documentation, and any status determinations you have already made.

Bring your accountant in before drafting any reply. They can assess whether there is a genuine issue, advise on the best way to respond, and draft any correspondence on your behalf. If a disclosure is needed, they can guide you through the Digital Disclosure Service and help negotiate any penalties.

Finally, reply within the deadline even if no disclosure is needed. A short letter confirming your position, with reference to the records reviewed, sits well on the file if HMRC follows up. Going silent for 30 days is often what triggers a formal compliance check in the first place, and a Schedule 36 information notice can quickly follow.

Spotting scam letters sent to businesses

Scam letters targeting businesses have become more sophisticated. Some closely replicate HMRC’s formatting and reference real deadlines to appear credible. One recent campaign saw businesses receive letters from a fake “Individuals and Small Business Compliance” department, requesting bank statements, VAT returns, and copies of directors’ passports.

Genuine HMRC letters to businesses will:

Reference your company’s UTR, VAT registration number, or employer PAYE reference
Come from a recognisable HMRC address
Direct you to GOV.UK services or your Business Tax Account
Never ask for sensitive documents to be emailed to a non-HMRC address

GOV.UK maintains a list of genuine letters currently being issued. If you are unsure, check this list or contact HMRC directly using the number on their website, not the number on the letter.

Making Tax Digital and the shift to digital letters

From April 2026, HMRC is moving to digital communications for businesses that already use their online services. Letters will be sent to your Business Tax Account rather than by post, with an email notification telling you to log in.

For businesses with gross self-employment or property income above £50,000, this change coincides with the start of Making Tax Digital for Income Tax, which requires quarterly digital reporting. HMRC has already written to affected taxpayers to prepare them for this transition.

If your business uses the HMRC app or Business Tax Account, make sure your email address and contact details are current. Missing a digital letter about a compliance issue carries the same consequences as missing a posted one.

Frequently asked questions

What is an HMRC nudge letter and is it the same as an enquiry?
A nudge letter is an informal prompt asking you to review a specific area of your tax affairs. It is not a formal enquiry and does not carry statutory powers, but ignoring it can lead to one.

Should our business sign the Certificate of Tax Position?
The CIOT recommends replying by letter rather than signing. The certificate is open-ended and signing it confirms a wider review than the letter implies, which can increase the penalty band if HMRC later finds an error.

How long does HMRC give us to respond to a business nudge letter?
The standard deadline is 30 days from the date on the letter. If you need longer, write to HMRC before the deadline explaining why and proposing a new date.

What happens if we ignore an HMRC letter to our business?
HMRC may open a formal compliance check under Schedule 36, which can include information notices, document requests, and penalties for unprompted disclosure being lost. Any underpaid tax found later will sit in a higher penalty band.

Talk to Wilson Partners before you respond

If your business has received a letter from HMRC, whether it is a nudge letter, a compliance check, or something you are not sure about, speak to us before you respond. We work with businesses across multiple sectors to review HMRC correspondence, assess the risk, and put together a response that protects your position.

A well-drafted first reply often keeps a matter at the nudge-letter stage and avoids a Schedule 36 information notice. Contact our tax team to discuss what you have received and what to do next.

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