Introduction
HMRC has issued a new round of one-to-many letters aimed at persons of significant control (PSCs). Such letters have been issued in the past to those PSCs who have declared income of below £100,000 or who have not submitted a tax return.
HMRC’s Wealthy team is sending two different nudge letters to some individuals listed on the PSC register.
- The first letter is directed at individuals who appear on the PSC register and have already submitted 2022/23 tax returns.
- The second letter is targeted at PSCs who are not currently submitting self assessment tax returns.
Reason for Targeting Certain Clients
- The letters were issued by WMBC (Wealthy Mid-size Business Compliance).
- WMBC aims to increase voluntary compliance among specific groups.
- Their approach promotes compliance, prevents non-compliance, and challenges rule-breakers.
- In the 2023-2024 period, WMBC achieved a compliance yield of over £9 billion.
Precursor to Full Investigation
- While not a full investigation, this letter serves as a “heads up.”
- It is not a legal notice.
- It encourages individuals to review their Self-Assessment Tax Returns (SATRs) and self-declare any errors or omissions before HMRC investigates further.
Preparing Self-Assessment Tax Return
- When providing information to prepare your SATR, ensure all information is complete and accurate in its entirety.
- Extra precautions are necessary in filing your personal tax return if you are in receipt of these letters.
- HMRC closely monitors SATRs for these clients, so accuracy is crucial.
Deadlines for Disclosures and Amendments
- The letter should state the deadline date.
- For the current round of letters this is 23 August 2024.
- Clients have until this date to make full disclosure of any omissions and/or errors on their tax returns.
- This includes details on any income underdeclared or omitted.
- This could also include benefits received from the company, receipt of a share options or a disposal of shares and other capital gains.
Consequences of Inaction
- If errors are found after the deadline, HMRC may initiate a compliance check (full investigation).
- Late payments can result in penalties and interest charges.
Penalties Based on Potential Lost Revenue (PLR)
- The level of assistance/co-operation provided by the recipient affects the quantum of the penalties.
- Ranges for different behaviours:
- Unprompted disclosure: No penalty
- Careless: 0% to 30%
- Deliberate: 20% to 70%
- Deliberate and concealed: 30% to 100%