Directors and Self assessment

[robpierre]

Hi All

I know this subject has come up numerous times but I have just had some new information from HMRC.

Basically I have a client that received a basic salary and dividends, all within the basic rate banding since April 2013.

We told her she would need to register for SA for 2016/17 as she would have a tax liability on the dividends. All the previous tax years she was not registered.
HMRC have now asked for tax returns for 13/14 - 14/15 and 15/16. I rang them today to tell them there was no liability and no need to file a return. The operator basically said its tough as she was a director she has to complete a return. I asked why and they responded "It's a new rule that has come in recently".

Has anyone had any recent experience of this and whether or not we need to complete returns for the past tax years?

Kind regards
Rob

[GeorgeG]

Hi Rob,
As far as I can remember, being a company director (except for those company directors that do not take any pay nor benefit, or those working for a non-profit company) was "always" a condition to trigger a self assessment (in quotes because the first time I checked for this was about 10 years ago).

This link shows all the conditions that would rigger that requirement https://www.gov.uk/self-assessment-tax- ... tax-return

Regards,
GeorgeG

[robbob]

Warning another waffly post

This has always been a bit of an anomaly - there is no requirement to do a return (i.e therefore no need to register for one to be done) but hmrc manuals indicate one should be done - so if one is issued they may not (or probably will not) cancel that return.

There was a recent confirmation that hmrc guidance has no basis in law with regard for the need for a return - but this doesn't alter the fact that if a return has been issued and hmrc want the return filed then its tough s*** and the return should be done. Nice to know the hmrc's plan of streamlining things is exactly the opposite of how it should be here.

https://www.accountingweb.co.uk/tax/hmr ... ax-returns

Note - not much help here but when a business has ceased sometimes ringing up and advising that the business ceased trading in a specific tax year will immediately lead to the prompted withdrawal of the return if there is no other criteria that need to be met - thats a bit of a hit and miss one though too.

I guess the final question is how far can hmrc go back and issue tax returns - without looking i dont know the answer but i guess the returns mentioned are all within allowable timeframes from hmrc point of of view.

The final practical advise i would say that MAY be of use is with regard to the notification that the return needs to be done in the first place - presuming you are doing the online SA1 equivalent method

HMRC say

Why do you need to complete a tax return?
Please tick the appropriate checkbox(es) below if any of the following reasons apply to you. Please also enter the relevant date for each checkbox ticked.

it then goes straight into "i am a company director" question and "i became a director on x date" question - however as mentioned above the directorship does not require a return to be done so if you legitimately take that point of view - dont tick that box -for the reason being that if you do tick the box then you need to enter the date of the start of directorship and that generates the earlier return.

Simply use the "date untaxed income received" box (as this is the reason you are registering) - you may then get lucky and hmrc may only issue the required return.
Unless i am missing something this route would seem acceptable to me as a method of registering. I.e the same route you would use for a non director shareholder who needs to complete a return.

[LozaACCS]

" A new rule that came in recently does not really cut it, does it"
I would suggest sending a letter stating that in the absence of any statutory authority for the request, (which should not refer to the nonsense contained in gov.uk running a limited company) you will instead rely on the orbita in M Kadhem (TC 5929) and choose to not bother right now.

[robpierre]

Thank you everyone for the responses, much appreciated

[bd6759]

The statutory authority is s8 TMA. HMRC can require anyone to complete a return.

Kahem is irrelevant. The Judge said "The Tribunal accepts that if a person receives a notice to file a return he is under an obligation to file a return by the due date.." As others have said, Kadhen succeeded becasue HMRC could not provide evidence that proper notice was given. That is not the case here.

[SteLacca]

I would simply go back to HMRC and ask for S8B withdrawal.

[robbob]

I would be interested to here if anyone has had any actual success cancelling returns for "directors of active companies" where hmrc know the reason for the return is due to the directorship only. I can see no harm in trying to ask hmrc to withdraw the returns but practicably speaking if their internal manual states a return must be done and its their choice as to whether they cancel the return are they not likely to reject all requests at present?

[LozaACCS]

Robbob
We have encountered this on a number of occasions, it usually arises when clients apply for a mortgage and are asked to produce an SA302 for the years concerned.
I do absolutely agree that if a notice is issued under section 8 of the management act then it should be filed unless a valid reason exists to request a withdrawal under section 8B.
I did interpret the OP,s post as suggesting that a call centre operative had stated that a return must be filed for the years concerned simply because the OP,s client was a director, this in my view is not correct nor is the guidance on which I assume the advice was given, I have reviewed the post and have to say that the OP suggests that a formal notice under S8 has been issued, I would certainly not advise the OP to ignore it if this were the case, although from the information supplied it would appear to be pretty academic.
That said, the issue I have addressed is whether the guidance is correct, ie if you are a director then you must register for SA or otherwise be in peril of penalties for not so doing, I would challenge any one to quote any law that would support this view. (the case law I have quoted clearly confirms this is not the case).
We have not encountered to date any clients having penalties charged for not registering to file a return when no return was due, but we have had clients quoting conversations where they have been advised that a penalty will be charged if they file an earlier years return (again when one was not due and a notice to file had not been issued).
In summary my view is that a director has no obligation to file a return where no tax is due and a notice has not been issued, if circumstances dictate that the director needs to file in respect of the current or earlier years then again in my view he/she can do so without incurring late filing penalties.

[robbob]

LozaACCS

That said, the issue I have addressed is whether the guidance is correct, ie if you are a director then you must register for SA or otherwise be in peril of penalties for not so doing, I would challenge any one to quote any law that would support this view. (the case law I have quoted clearly confirms this is not the case).

I think we are all 100% agreement over this point that there is no need for a return to have been issued in the first place - i was purely concentrating on the issue asked about by robpierre - that hmrc will normally refuse to cancel an already issued return despite the fact that that return need not have been issued in the first place (albeit their internal guidance doesn't make this fact clear to their workers). Practicably speaking i have never known hmrc cancel an issued return for a director of an active company and i am still interested to find out if anyone else has managed to get this done consistently as that is the problem being faced by the op - if there is a solution it would be useful to know.