UK revenue is targeting Persons with Significant Control

The UK revenue authority’s (HMRC) Wealthy Unit is in the process of sending ‘nudge’ letters to Persons with Significant Control (PSCs) who have not filed a tax return or may not have declared all their income.

The Wealthy Unit is responsible for scrutinising the affairs of around about 700,000 UK residents who have net asset wealth of more than £2 million or whose income has exceeded £200,000 in the last three years.

A PSC is defined as someone who either holds more than 25% of shares or voting rights in a company, has the right to employ or remove most of the board of directors, or has significant influence or control in a company.

The PSC rules require a company to identify all the people who can control it, and to report this information to Companies House. HMRC has reviewed this information and is now writing to those PSCs that it thinks may need to take action.

The first letter asks the PSC to check their tax return for 2022/23 and to correct any errors by 23 August 2024. The person is also encouraged to make sure that their tax return for 2023/24 includes all sources of income and gains.

The second letter is aimed at PSCs who have not submitted a tax return. The person is asked to check if they need to register to submit a return. If a return should have been submitted for 2022/23, they should register and submit the return by 23 August 2024. If they fail to do so, HMRC said it may charge a failure to notify penalty.

The letters remind PSCs that they may have to pay tax as an individual if they have:

• Used the company to pay for personal costs that are not reimbursed.
• Used business assets without paying an appropriate market rent or equivalent.
• Transferred personal assets to the company.
• Transferred assets from the company.
• Received loans and do not pay interest at an official rate.
• Received loans that are not paid back.
• Taken up an option to buy shares.
• Disposed of shares, property or other assets.

The letters also explain that, if HMRC discovers an error in a submitted return or that a return should have been submitted, it may open a compliance check. Where no return has been submitted, HMRC has the option of raising a determination, which will allow it to estimate the amount of tax due and to then collect that amount.

“The introduction of the PSC register was intended to improve transparency in the ownership and control of companies. Now that the government has the information – and given the parlous state of the UK government finances – it is no surprise that HMRC is now targeting PSCs,” said Simon Denton, Managing Director of Sovereign UK.

“I would strongly recommend that anyone on the PSC register should get regular professional advice on their compliance obligations and, if they don’t want an unpleasant surprise, that they ensure that their tax reporting is handled by appropriate qualified advisors and organisations.”

For further information, please contact Simon Denton by phone on +44 (0)7887 991649 or by email below.