HMRC has once again embarked on its nudge letter campaign!, This time, company directors and shareholders are the primary targets.
Commencing on February 4, 2024, HMRC has initiated the dispatch of letters aimed at notifying recipients about potential under-declarations of dividend income.
HMRC will be scrutinising company reserves, flagging any inconsistencies between reported profits and diminishing reserves. Such disparities may indicate the possibility of undisclosed dividends, prompting HMRC's intervention.
If you find yourself on the receiving end of HMRC's Nudge letters, here's a step-by-step guide on what actions to take:
Take a detailed look at the dividend income declared on your tax returns for the preceding years. Ensure accuracy and completeness in your declarations.
If you're confident that all income has been accurately reported, sign and return the form enclosed within the HMRC's nudge letter, confirming that your tax affairs are up to date.
Should you uncover any errors in your returns, You must correct them. We advise that you utilise HMRC's digital disclosure service (DDS) to disclose any previously undisclosed income.
Upon registering with the DDS, you'll receive a disclosure reference number (DRN). You have 90 days from the receipt of the DRN to submit your disclosure.
As part of the disclosure process, self-assess your penalty rate based on your perceived behaviour and calculate the interest payable. Subsequently, make an offer to HMRC for consideration and settle the total liability owed.
If HMRC accepts your disclosure, the matter will be resolved. However, if your disclosure is rejected, revisit the submission, rectify any errors, and resubmit as necessary.
Given the complexities involved, it's advisable to seek assistance from our tax experts here at ETC Tax, especially if you or your clients receive a HMRC nudge letter.
It is important not to ignore these letters. Failure to address them may prompt HMRC to initiate a compliance check, potentially leading to heightened penalties.
Proactive engagement with HMRC's nudge letter campaign regarding dividend income declarations is crucial. By adhering to the above-outlined steps and seeking professional guidance when necessary, individuals and businesses can navigate this process effectively, mitigating risks and ensuring compliance with tax regulations.
Please contact us if you have any further queries on HMRC's Nudge Letters or any one of the above points.
