In its latest campaign, HMRC are sending nudge letters to persons with significant control (PSCs) who may not have declared all their income or benefits. The letters give PSCs until 23 August 2024 to report any undeclared income or benefits.
What is a PSC?
You will be a PSC if:
- You hold more than 25% of the shares in a company.
- You hold more than 25% of the voting rights in a company.
- You have the right to appoint or remove a majority of directors.
- You exercise, or have the right to exercise, significant influence or control over a company.
These conditions can be met either directly or indirectly, e.g. if you hold shares or voting rights through another company, or on behalf of someone else.
If you meet any of the criteria listed above, you may receive a letter from HMRC asking you to check whether you have correctly reported your income.
Why are HMRC sending out these letters?
All UK companies and limited partnerships are required to keep a register of PSCs on Companies House.
HMRC can then compare the data on this register with the information reported on tax returns to make sure PSCs have appropriately declared their income and benefits. If HMRC notice any discrepancies between the sources of data, they will likely send a nudge letter.
What kind of income or benefits should I declare?
Aside from receiving dividends or salaries from a company, you may also have income to declare if:
- You use the companies’ assets free of charge. This can include the use company cars or accommodation.
- Receive low interest or interest-free loans from the company, or loans that you are not expected to pay back. An overdrawn director’s loan accounts may be considered a taxable benefit.
- Your personal expenses are paid by your company. For example, you will have a taxable benefit if your company settles your legal and accountancy fees on your behalf.
What kind of letter should I expect?
HMRC are sending out two different nudge letters. The first nudge letter is addressed to PSCs who have submitted tax returns for the 2022/2023 tax year, providing them with the opportunity to check their returns and correct any mistakes by 23 August 2024.
The second nudge letter is addressed to PSCs who have not submitted a return for 2022/23. They encourage the PSC to check whether they should register for self-assessment and submit a tax return by 23 August.
The letters warn that failing to take appropriate action before the deadline might lead to a formal compliance check and penalties if any errors or omissions are identified.
If you have received one of these letters and would like to make sure your tax affairs are compliant, please get in touch.
This article was correct at time of publication.
