Whether a company director must submit a Self-Assessment tax return to HM Revenue & Customs (HMRC) is a question that crops up regularly, only fuelled by ambiguous advice on the Government website and HMRC’s assertion that it is necessary for all to do so.
For several years, HMRC has advised that company directors should register for Self-Assessment. This advice has also been upheld by HMRC’s online tools, designed to help individuals determine their obligations.
Despite this, the requirement is not enshrined in law and now, following a series of tribunal rulings, HMRC has dropped its insistence on the matter and published updated guidance online.
The new guidance, published in December 2018, confirms that directors are not required to file Self-Assessment tax returns if they have been taxed under PAYE and do not need to pay tax on other income.
The guidance clarifies that anyone chargeable to income tax or capital gains tax (CGT) must tell HMRC they are chargeable to tax if they have:
- not received a notice to file a return; or
- received a notice to file a return and HMRC has agreed to withdraw the notice.
Exclusions to this rule include:
- individuals in receipt of a Simple Assessment (unless they are chargeable on anything that is not included in the assessment);
- individuals whose income has been taxed at source; and
- individuals not liable to the high-income child benefit charge.
Many company directors are taxed under PAYE and so will not need to give notice of liability to tax; this is provided that they have no other untaxed income, such as dividends.
The tool on gov.uk, that helps people to decide whether they need to complete a return, reflects the latest guidance too.
A director will get the following result, ‘You do not need to send a Self-Assessment tax return’ as long as their income is below £50,000 and they have no other taxable income.
However, HMRC still emphasises that if it issues a notice to file a Self-Assessment tax return, a director must comply unless a request to HMRC to withdraw the notice in question is accepted.
It is worth bearing in mind that HMRC is not obliged to withdraw the notice, even if there is no tax to pay. If HMRC have decided that you must submit a Self-Assessment tax return, you must do so to ensure that no penalties are incurred.
You can use the government’s online tool to ascertain whether you fall within the scope of the Self-Assessment regime, but if you’re still unsure we would encourage you to seek professional advice at the earliest opportunity to avoid being fined.
By entrusting us with your annual tax return, you can rest assured that we will take care of your tax affairs, accurately, efficiently and compliantly. We can assist you with fulfilling your self-assessment obligations; saving you time and money, helping you to grow your business and eliminating anxieties in the process.
If you’d like to meet with one of our advisers to discuss your circumstances in more detail, contact us at any one of our three offices in Biggleswade, Letchworth and Huntingdon, or fill in one of our online enquiry forms here.