In its latest one-to-many campaign, HMRC is writing to Persons with Significant Control (PSC) who have not filed a tax return or may not have declared all their income, according to the Institute of Chartered Accountants in England and Wales (ICAEW). We note that HMRC's letter will count as a 'prompt' if any income or gains have not been reported under Self Assessment.

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  • Certain types of entity must keep a register of Persons with Significant Control (PSC) and notify details of their PSC to Companies House.
  • PSCs are individuals or legal entities that have control or influence over an entity. They generally comprise owners, beneficial owners or managing officers.
  • The PSC register is kept with an entity's statutory records and must be available for inspection upon request.

Taxpayers who are not already filing tax returns under Self Assessment have a duty to notify HMRC of their chargeability to tax in respect of any tax year in which they have untaxed income or capital gains.

  • Once a taxpayer has made notification, HMRC then issues them with a Notice to File a Tax return.
  • The onus is on the taxpayer to report to HMRC and not vice-versa.
  • Anyone who has failed to notify past chargeability to tax will need to consider making a disclosure to HMRC.

Failure to declare income or gains

  • Under the rules for Discovery Assessment, HMRC can go back and assess income or gains for up to the last 20 years if there has been a Failure to Notify Chargeability or deliberate concealment of taxable income or gains.
  • If a taxpayer has already filed a return, and the Discovery conditions are met, the normal assessment period is up to 4 years extending to 6 years in the case of carelessness by a taxpayer or their agent.

The letters provide examples of the situations in which a PSC may receive income or benefits from a company for tax purposes. These include: 

  • where the company pays the individual’s personal costs; 
  • where the individual receives a loan from the company and does not repay it; and
  • where the individual uses the company’s assets free of charge.  

Useful guides on this topic

Assistance in making a tax disclosure?
Contact the Virtual Tax Partner support service for expert assistance in making a tax disclosure

Discovery Assessment
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? Can HMRC issue two alternative assessments for the same period? What are your rights of appeal and defences?

Failure to notify chargeability to tax
What is failure to notify chargeability to tax? What happens if you fail to notify HMRC about your taxes? What penalties apply for failing to notify HMRC that you have a tax liability?

Penalties: Failure to notify chargeability
What tax penalties apply if you fail to notify HMRC that you are chargeable to tax? Can they be appealed or reduced?

External links

HMRC targets persons with significant control

 

 

 

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