“People with Significant Control” (PSCS) have to be registered at Companies House and HMRC have identified taxpayers who have either been removed as a PSC or are shown as having a reduced level of control. In these cases, they have assumed that there was a disposal of some or all of the shares which may have triggered a capital gains tax (CGT) charge and they are contacting those who did not make a report on their personal tax returns for the year ended 5 April 2021.
If you are in this position, even if you have not received a letter, you need to consider whether you should have made a report and, if so, take the appropriate action as soon as possible as interest will be running on late paid tax since 1 February 2022.
HMRC routinely check information on Companies House to ensure that relevant information has been reflected on the tax returns of not only the relevant companies, but also the associated directors and shareholders. One of the items which companies must report to Companies House is a list of PSCs – essentially those people who own or control that company, and any changes to that PSC information must also be reported.
What is a 'person with significant control'?
Generally, you will be a PSC if you hold more than 25% of the shares/voting rights in the company and/or have the right to appoint/remove the majority of the board of directors, but you may also be included if you have ‘significant influence or control’ over the company.
If you are a PSC, there is no need for you to report that, specifically on a personal tax return.
However, if you receive any employment-related earnings (even if this is subject to PAYE), receive any dividends or make disposals of your shares, this could trigger a self-assessment reporting requirement.
In this campaign, HMRC have cross-referenced the PSC information at Companies House with the personal tax returns and identified individuals who have either been removed from the PSC register or whose control has reduced, but who have not reported a share disposal. They are writing to them to encourage them to either submit or amend a tax return.
The first step is to check whether you made a disposal of shares which should have been reported. Your shareholding may have reduced for other reasons, such as other people acquiring shares, reducing the proportion which you own. Alternatively, you may have disposed of the shares but not exceeded the reporting requirement limits for 2020/21 (Sale proceeds or market value less than £49,200 and capital gain less then £12,300). Provided that you are satisfied that no report was required, and that no CGT was due, you do not need to take any further action.
If you did make a disposal which exceeded the reporting limits, you may be able to claim relief in certain circumstances, or you may have capital losses available which could reduce your tax charge. Otherwise, CGT will be due on gains exceeding £12,300 at a rate of either 10% or 20%, depending on whether you are a higher rate taxpayer. That tax should have been paid by 31 January 2022 and interest will be charged on any late paid tax.
If you made a reportable disposal, even if no CGT is due, you should check and, if necessary, amend the tax return by 31 January 2023 to show the details. These ‘One To Many’ (OTM) letters do not constitute formal enquiries by HMRC but if you either fail to reply or do not report correctly, a formal enquiry may follow and penalties may be charged.
Even if you have not received a letter but now realise that you should have reported a disposal, you should consider the appropriate way to make a report to HMRC. In all these circumstances, voluntary disclosure of information to, and cooperation with, HMRC should result in reduced penalties.
Finally, although this campaign has been prompted by information already provided to Companies House, it is important to make sure that your company is complying with all the relevant reporting requirements to avoid penalties at the corporate level.
If you need help with this, contact our company secretarial team.