The significance of ‘One To Many’ letters from HMRC

Letters have been sent out to individuals listed as ‘Persons of Significant Control’ (PSC), urging them to check and, where necessary, correct their tax returns.

HM Revenue & Customs (HMRC) Wealthy External Forum has been posting the ‘One To Many’ letters to PSCs listed at Companies House.

A PSC is someone who owns or controls your company – sometimes referred to as ‘beneficial owners’.

Before 2016 UK companies only needed to record the immediate, legal owners of their shares and submit these details to Companies House.

Since 6 April of that year under the PSC regime, companies have had to look through multiple layers of ownership where appropriate, to identify relevant persons who have significant control of the company.

HMRC say most PSCs are those who hold:

  • More than 25 per cent of shares in the company
  • More than 25 per cent of voting rights in the company
  • The right to appoint or remove the majority of the board of directors

HMRC’s ‘One To Many’ approach allows them to reach many taxpayers about a specific issue where the data suggests there may be a reason for non-compliance – but they are not always accurately targeted.

One of these so-called nudge letters in particular is targeting PSCs whose income in 2020/21 was lower than £100,000.

It asks them to check that their 2020/21 return was correct and, where it isn’t, adjust their tax position in their 2021/22 returns if amongst other things:

  • They have utilised company assets for personal use
  • Received a loan from their company
  • They have personal costs paid by their company.

Another set of letters has been sent to those who are PSC but do not appear to have filed tax returns at all.

Where additional sources of income or gains are identified, taxpayers who have already filed are asked by the taxman to amend their 2020/21 tax return and to include anything relevant on their 2021/22 tax return.

The letters were sent out in late October and taxpayers are advised not to ignore these communications from HMRC.

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