HMRC Nudge Letters: Now It's The Turn Of PSCs

In continuation of HMRC's educational campaign aimed at helping individuals understand their obligations as Persons with Significant Control (PSCs), the HMRC Wealth Team is sending over 2,000 nudge letters to specific groups of PSCs ...

These nudge letters are being sent to individuals who declared income below £100,000 in their most recent return and those who have not submitted a self-assessment tax return. The £100,000 threshold for income selection has been set by HMRC to target taxpayers who have reported a lower income compared to most people in a similar position.

It is worth noting that only 8% of UK households had an annual income exceeding £100,000 in 2019/20, though this figure doubled to 16% for households in London!

The purpose of these nudge letters is to prompt individuals to review their 2021/22 tax returns for any undeclared benefits or gains, such as the use of business assets, transfer of assets to or from the company, loans from the company, share options, and disposal of shares in the company. If a correction is needed, HMRC requests that it be done by 18 August 2023.

It is important to note that these letters serve as educational reminders and do not imply any wrongdoing by the taxpayer. However, the letter does warn that failure to address any errors may result in a compliance check, investigation, and potential penalties, along with additional tax liabilities.

Another group of PSCs targeted by this educational campaign are individuals who have not submitted a self-assessment tax return to HMRC. They are encouraged to use the online tool "Check if you need to send a self-assessment tax return" on gov.uk to determine whether they need to register for self-assessment and submit a return for the tax year 2021/22.

"Previously, HMRC required all company directors to submit self-assessment tax returns!"

That was even if their salary and dividends were modest. However, the updated version of the online checking tool now prompts directors to complete a return only if their dividend income exceeds £10,000.

The nudge letter sent to PSCs who have not submitted a tax return requests them to register for self-assessment and submit their tax return for 2021/22 by 18 August 2023. Alternatively, they are instructed to contact HMRC.

They should certainly speak to their Tax Adviser first.

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