Get Your Self Assessment Tax Return Right!

HMRC is sending One to Many Letters (OTM) to all property companies 'Person with Significant Control' (PSC). These letters target individuals who either failed to submit a personal tax return for the tax year 2022-23 (6th April 2022 to 5th April 2023) or whose tax returns for 2022-23 and 2023-24 reported lower income levels than HMRC anticipated. 

Recipients of the first letter must submit their 2022/23 tax return by 23 August 2024. Those who receive the second letter must also ensure that their tax returns for both years are complete and accurate by the same deadline. 

Who is a PSC? 

For a property company, a PSC (Person with Significant Control) is an individual who meets one or more of the following criteria: 

• Holds more than 25% of shares or voting rights in a company. 
• Has the right to appoint or remove most of the board of directors. 
• Has significant influence or control over the company. 

What are the Potential Tax Consequences for a PSC? 

As a PSC, you should be aware of potential tax liabilities arising from various actions involving the company. You may have to pay tax as an individual if you: 

• Use the property company to pay for personal costs that you don’t reimburse to the company. 
• Have the use of business assets for which you don’t pay an appropriate market rent or equivalent. 
• Transfer personal assets to the property company or transfer assets from the property company. 
• Receive loans from the property company and do not pay interest at an official rate or fail to repay the loans.  
• Take up the option to buy shares. 
• Dispose of shares, property, or other assets. 

Certain benefits, such as cars and vans available for private use, loans, specific arrangements related to share incentive schemes, scholarships, and tax not deducted from employment income paid to PSC’s, are subject to tax. For example, the beneficial loans received by a Person with Significant Control is taxable on the difference between interest at the appropriate official rate and the interest, if any, actually paid. 

Registering for Self-Assessment 

A Self-Assessment tax return is a system used by HMRC to collect Income Tax, requiring individuals to declare their entire worldwide income and capital gains for a tax year. Hence, a PSC needs to determine whether they need to register for a Self-Assessment tax return and pay the required tax. 

Do You Need to Complete a Self-Assessment Tax Return? 

To determine if you need to complete a Self-Assessment tax return, visit GOV.UK and search for "Check if you need to send a Self-Assessment tax return." 

Deadlines and Requirements 

The deadline to submit a Self-Assessment tax return for the tax year 2022 to 2023 was 31 January 2024. If you have missed this deadline, you must still register and submit your return by 23 August 2024, as per the HMRC letter. 

Consequences of Not Registering 

If you don’t register for Self-Assessment and inform HMRC about any tax you owe on time, you may incur a 'failure to notify' penalty unless you have a 'reasonable excuse.' Additionally, interest will be charged on late payments.  

What to Do If You Don't Need to Complete a Tax Return 

If you believe you don’t need to complete a tax return, you should get in touch with HMRC. However, you need to explain why you think you don’t need to register for Self-Assessment. 

Ensuring Correct Self-Assessment Tax Return 

Self-Assessment tax return for the tax year 2023 to 2024 includes all sources of income and gains, including those listed above. 

You can amend your tax return for the tax year 2022 to 2023 to correct any errors. However, you need to make sure you do this before 23 August 2024. 

Additional Reporting 

You may have additional sources of income or gains to report on your tax return that you have missed. You can also report these to HMRC. If you're unsure how to report it, you can get in touch with us, and we will be able to help you with this. 

Compliance and Penalties 

It’s your responsibility to ensure your tax return is complete and correct. HMRC may find errors that you should have corrected after receiving this letter but didn’t. If so, HMRC may open a compliance check and investigate. This may mean more tax to pay and potential penalties. HMRC will also charge interest on late payments. 

For more information about inaccuracy penalties, please read, ‘Compliance checks – penalties for inaccuracies in returns or documents’.  

If HMRC finds that you should have registered for Self-Assessment after receiving this letter but didn’t submit a tax return, HMRC may: 

• Open a compliance check to investigate. 
• Raise a determination (an estimate of the tax HMRC believe you owe, allowing HMRC to legally collect this amount). You can pay the estimated figure or send in a return with the correct information if you disagree. 

For Help and Advice 

As specialist property tax accountants, we can assist you with this. To do so, you need to authorise us to act as your agent. We work to identify and maximise any tax reliefs or benefits you may be eligible for, ensuring you pay no more tax than necessary. By authorising us to act as your agent, we can represent you in dealings with tax authorities, simplifying the process and reducing your stress. 

Frequently Asked Questions