HMRC’s Wealthy Team are sending ‘nudge’ letters to taxpayers associated with companies put into a members’ voluntary liquidation (MVL).

The ‘one to many’ letter warns these taxpayers to report a corresponding capital or income distribution in their 2021/22 tax returns before the 31 January 2024 deadline.

What is a distribution?

A distribution is any amount you receive from the liquidation of a company. This includes the market value of any assets that transfer to you.

HMRC is asking you to check if the distribution should be considered as an income distribution or a capital distribution.

Do you need to change your tax return?

If you need to update your self-assessment tax return to include an MVL distribution:

  • You may owe HMRC tax, and interest on any tax that is paid late, and a penalty may be due.
  • HMRC may open a compliance check or take any other corrective action, and it will also consider penalties.
  • HMRC may owe you a refund.

If you don’t amend your return before the 31 January 2024 deadline, and HMRC believes it’s wrong:

  • It may open an enquiry after this date to check your return.
  • If it finds the return is incorrect, you may have to pay penalties.

Need help understanding your taxes?

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Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation