Tax clarity for directors

Good News for directors from HMRC

For many years, HMRC have muddied the waters with their guidelines on company directors and self-assessment. Even if a director has no tax to pay, they’ve insisted that directors must register for self-assessment – even though the law states otherwise. At last, HMRC have come off directors’ backs and issued new guidelines. Common sense, it seems, has prevailed.

At last - tax clarity for directors

Are you a company director? If you are, then it won’t have escaped your notice that HMRC has always appeared to demand that you register for self-assessment, even if you have no tax to pay. Many directors, fearful of incurring the wrath of the government department have meekly complied. The fact is that, all this time, HMRC have been in the wrong. There never was a legal obligation to register. At long last, HMRC has clarified the position and now they simply advise you to register. They’ve even gone so far as to include in their online tools, a device that helps you decide whether or not you need to complete a return.

The new guidelines spelt out in detail –

If you are chargeable to income tax or Capital Gains Tax (CGT), you must inform HMRC if

or

There are exceptions to this rule –

Many company directors are taxed under PAYE and so don’t need to give notice of liability to tax, as long as they have no other untaxed income.

Tribunal ruling

This change, announced in December, has come about following several cases brought o tribunal. The most noteworthy was company director, Karen Symes. She had received neither income nor dividends from the company. Yet HMRC had insisted she complete a tax return.

Judge Thomas concluded,

“No one has a statutory obligation to do anything in relation to income tax simply because they are a director of a company which is not a not-for-profit company. Being a director per se does not entitle a person to dividends … If dividends from the company of which a person is a director fall within the higher rate band or above [for 2015/16], then there was a liability to notify, but not because of being a director.”

The happy news is that, following this and other similar cases, HMRC has at last amended their position. Their new guidelines state that, as a director, you won’t have to file a self-assessment return if you pay tax via PAYE and have no tax to pay on other income, such as dividends.

Section 8 TMA 1970

However, this positive announcement is tinged with a warning. HMRC make it clear that, under section 8 Taxes Management Act 1970, they may still issue you with a notice to file a self-assessment return. Although you can formally ask them to withdraw the notice, HMRC has the right to insist on a return. If you do receive a notice to file a tax return, you must do so within the deadline. Otherwise, you could become liable to a penalty.

This news highlights how easy it is to misinterpret the ever-changing government guidelines. This is where we come in. We’re Tax Advice Specialists. We understand tax at all levels and are here to support you through the minefield of personal tax, business tax, VAT, international tax and tax appeals.

We’re here to help.

Disclaimer

This legal information is not the same as legal advice and you may not rely on our post as a recommendation of any particular legal understanding. Please, consult an attorney if you’d like to get advice on your interpretation of this article.

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