HMRC are in the process of writing to people with significant control (PSC) who have not declared all their income.
A PSC is a person who:
- Directly or indirectly owns more than 25% of the shares in a company
- Directly or indirectly owns more than 25% of the voting power in a company
- Has the right to appoint or remove the majority of directors of a company or
- Can exercise influence over the company.
https://www.gov.uk/guidance/people-with-significant-control-pscs
More guidance is given in the above link.
The PSC rules require a company to identify all the people who can control and to report this information to Companies House. HMRC has reviewed this information and is writing to the PSC where it believes the person may need to take action.
There are 2 types of letters being sent out, the first one asking the PSC to check their tax return for 2022/23 and to correct any errors by 23 August 2024. There is guidance on how to do this and the person is advised to ensure that all the income and gains are disclosed in their personal income tax return to 5 April 2024.
The second type of letter is aimed at PSCs who have not submitted a tax return and encourages the person to check if they need to register for self-assessment and submit a tax return for the year ended 5 April 2023. If after checking the PSC realises, they need to be registered and submit a tax return to 5 April 2023 they have until 23 August 2024 to do so. If they fail to do so HMRC may charge a failure to notice penalty.
PSCs can write to HMRC as there will be contact details in the letter whereby, they can advise HMRC if they believe that a personal income tax return is not required.
The letter also explains that if HMRC discovers an error on a submitted return or a return should have been submitted they may open a compliance check.
Where a return has not been submitted HMRC has the option of raising a determination and this allows it to estimate the amount of tax due and collect it.
The letters provide examples in which a PSC may receive income or benefits from a company for tax purposes and they include.
- Where the company pays the individual’s personal costs
- Where the individual receives a loan from the company and does not repay it.
- Where the individual uses the company’s assets free of charge.
If you have received either one of the two types of letters mentioned above, or you would like advice as to whether you should be preparing personal tax returns, then please contact us on 0345 046 0406 or complete our online enquiry form.