HMRC have announced that they will be writing to company owners to check that they have correctly reported their dividend income.

Companies identified as having made a profit, but with depleted reserves, are targets as this may indicate that dividends have been paid.

Although the letter takes the form of a “nudge” letter, a response is required within 30 days, either advising that there is nothing to declare, or advising that a disclosure is required.  Failure to respond may result in a formal enquiry being opened.

With all “nudge”  letters we recommend that the Certificate provided by HMRC with these letters is not used to reply, as this has potentially serious implications if there is any inaccuracy in the disclosure.  Any disclosure required should be made through HMRC’s online Digital Disclosure Service (DDS).

As the dividends allowance reduces to £500 from 6 April 2024, more people are going to fall within the tax charge.  Any additional tax payable on disclosure will be subject to interest and penalties, although in most cases it should be possible to apply for penalties to be suspended.