HMRC targets “significant” shareholders

Nudge letters are being increasingly used by HMRC in recent years. They are generally sent to individuals that HMRC thinks may not have fully declared their income, and are a kind of informal “prompt” to take action if needed. The latest campaign is targeting people that appear on the persons of significant control (PSC) register if either:

• less than £100,000 of income was declared on their 2020/21 tax return; or
• they are not submitting self-assessment tax returns.

Of course, it is perfectly possible to be a PSC and have little to no income from the company to declare, e.g. shareholders of a company that isn’t trading, or is making losses meaning no dividends are being paid out so receipt of a letter doesn’t necessarily mean you’ve done anything wrong. Nonetheless, the number of letters is likely to be significant. So what should you do if you receive one?

If you have not been completing self-assessment tax returns, you can check whether you need to here. If you are already within self-assessment but haven’t declared any taxable benefits received from the company, receipt of a share option or a disposal of shares, the letter should instruct you to amend your 2020/21 tax return. The deadline for doing so is 31 January 2023, but ideally you should pay any outstanding tax as soon as possible to avoid further late payment interest charges.