In their latest one-to-many letter, HMRC turn their attention to company owners who may have underdeclared dividend income.

The letters, being sent to company shareholders from 5 February 2024, state that HMRC believe Dividend income may not have been fully declared.

Using information from company accounts, HMRC can compare reported profits to movements in reserves. They can identify potential cases where reserves drop despite profits being recorded. HMRC surmise that this indicates that the companies’ shareholders may have received a distribution or dividend.  

Where individuals have undisclosed income to declare, they are asked to inform HMRC by following instructions given online. If no income needs to be disclosed, taxpayers are asked to let HMRC know by phone or email.

In both cases, HMRC give a 30-day deadline to get in touch, stating that a compliance check may otherwise be opened.

Future developments in reporting dividends

  • From 2025-26, It is intended that HMRC will have more information at their disposal to determine whether company owners are fully declaring their dividend income.
  • Regulations are expected to be laid in Spring 2024 which will require director-shareholders in Close companies to detail the amount of dividend income received from such companies separately from other dividend income in their tax return. In addition, their percentage shareholding will need to be disclosed.

Useful guides on this topic

Dividend tax
This practical tax guide explains how dividends are taxed. It includes HMRC's own examples, more detailed examples, including an Owner Managed Business (OMB) section together with tax planning tips.

Close companies: Definitions & control
What is a Close company? What are the tax consequences? What is a Participator? What is meant by Control of company? What are the tests for Control? 

Finance Act 2023: tax update & rolling planner 2023-24
This rolling planner tracks the key tax announcements that impact the 2023-24 tax year and beyond. This planner is updated on an ongoing basis. 

Dividend waiver: Specified dividend
How do you waive entitlement to specific future dividends? 

Dividend Waiver: Unknown future dividends
How do you waive entitlement to all future dividends paid in future earnings periods?

External link

CIOT: HMRC One to Many letter – Inferred Distributions