Do all Company Directors have to file tax returns?

09 August 2017

The stubborn insistence by HMRC that all company directors must file a Self Assessment tax return has been a point of discussion in practices for many years. It is mandatory for a company director to file a tax return with HMRC, if a return has been issued. It is also mandatory under the terms of the legislation, if they have a liability to tax for a particular year of assessment, to notify HMRC by 5 October following the end of the year of assessment, otherwise they become liable to penalties.

The position was unclear where a Self Assessment tax return had not been issued to a director and there was no tax liability, for example, where the director had paid the tax under PAYE deduction.

HMRC’s on-line guidance “Do you need to complete a tax return?” states that:

"You must complete a return if you're any of the following:

  • you were a company director - unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car
  • your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
  • you had income from abroad that you needed to pay tax on
  • you lived abroad and had a UK income
  • your income was over £100,000 ...”

We have had several instances over the years of HMRC staff insisting that a tax return is required for a director even though a return has not been issued and there is no further tax liability for the year, in accordance with the above guidance.

In a recent tribunal case, Mohammed Salem Kadhem (case TC05929), the position has been cleared and has shown that the HMRC guidance is misleading. An individual must submit a Self Assessment tax return if they are issued with a notice to file a return. An individual who has not been issued with a notice to file a tax return, or who has received such a notice but it was withdrawn, must none the less report to HMRC if they have income or gains which are chargeable to tax for the year. This report must generally be made by 5 October after the tax year end.

A director whose only income is taxed under PAYE, or has no taxable income at all and who has not received a notice to a file a tax return, is not required to report to HMRC or to register for self-assessment.

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