HMRC HAVE ADVISED that they have commenced a “One to Many” letter campaign directed at shareholders who they suspect may need to declare income from dividends (and/or distributions).
Unfortunately, this typical “wide net” approach from HMRC means that many individuals, perhaps including vulnerable ones, will receive HMRC letters which could be misinterpreted as an accusation of tax avoidance. If you have receive a letter, don’t panic.
In today’s Shipleys Tax brief we look at what you need to know about HMRC’s One to Many letter campaign and how to respond effectively to avoid escalation.
What is HMRC’s One to Many Letter?
The HMRC has initiated a campaign targeting taxpayers who may not have declared income from distributions or dividends. Using data from company year-end accounts, which show significant drops in profit and loss account reserves, HMRC is pinpointing individuals who might have received a distribution or dividend but not declared it on their self assessment tax return.
HMRC… have commenced a “One to Many” letter campaign directed at shareholders who they suspect may need to declare income from dividends
The letter provides a 30-day window for recipients to either declare any undeclared income or to inform HMRC that all income has been accounted for. Ignoring the letter could lead to a compliance check and potential penalties.
Why You Might Have Received The Letter
HMRC’s usual method involves analysing publicly available company accounts to spot decreases in reserves and other factors, which could indicate dividend payments. However, this typically broad approach doesn’t account for dividends payments which may not be chargeable, e.g. they fall within personal and dividend allowances and are tax-free or issues relating to timing. Accordingly, if you’ve received such a letter, it may simply be part of this blanket strategy to ensure tax compliance but it’s best not to ignore it.
How to Respond to the Letter
If You Have Declared Everything:
- Contact HMRC using the details provided in the letter.
- Confirm that all necessary declarations have been made.
If You Need to Make a Declaration:
- Review your tax return and determine if there’s any undeclared dividend income.
- Visit the HMRC’s GOV.UK link on making a disclosure and use the specific online disclosure facility.
The Implications of Not Responding
Failing to respond to the HMRC’s letter can result in a compliance check and possibly higher penalties if undeclared income is discovered. It’s crucial to take action within the specified 30-day period stated in the letter. If they believe that they have no income to declare, the letter asks them to let HMRC know either by telephone or by email, again within 30 days. If they do not respond, the letter says that HMRC may open a compliance check and charge higher penalties.
Conclusion
The One to Many letter from HMRC is part of a proactive approach to tax compliance. If you’ve received one, take a moment to review your finances and speak to your adviser. With the right response, you can quickly resolve any issues or confirm your compliance, ensuring peace of mind and maintaining good standing with HMRC.
For further assistance or queries, please contact us by phone or email.
Please note that Shipleys Tax do not give free advice by email or telephone. The content of this article is for general guidance only and should not be considered as tax or professional advice. Always consult with a qualified professional before taking action.
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