Directors & SA (again) but a case on penalties that helps a bit

Directors & SA - another case on penalties

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Whilst the taxpayer in this case lost the late penalty appeal, because he was registered for SA and issued with a return for the year in question, it does at least include the following note at 15:

15. In looking at the legislation there is no specific requirement in the TMA 1970 for a director to register for self-assessment if he or she has no further tax liability for the year. There is HMRC Manual EM4551 which states as follows:

“There is no requirement to notify chargeability where there is no liability to Income Tax or Capital Gains Tax or where sufficient tax has been deducted at source to meet the net liability for the year.”

Therefore, it seems that if a director of a company has no further liability for a tax year and no self-assessment tax return has been issued by HMRC, then there appears to be no requirement for the director to notify chargeability or to file a tax return with HMRC for the year in question.

TC05419 A SHAWARDI & HMRC

So if a client sets up a company and is registered at Companies House as a director then HMRC will probably cross reference that and set the director up for SA and issue returns, but if they do not there is no requirement to do so - [EDIT] assuming of course that there is no additional liability for a year. 

One must assume that if HMRC register such a client late and issue returns for previous years then a claim to cancel those returns under TMA s8B will not be accepted and the returns will still have to be submitted, but so long as they are submitted within 3 months of issue, and there is no additional liability in any year there can be no question of a late notification penalty, which is taxed based & would be nil in any event.

Replies (8)

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By Paul D Utherone
27th Oct 2016 09:07

Weird formatting of the quote again

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By SteveHa
27th Oct 2016 10:32

I've had late issue returns for directors with no SA liability withdrawn under S8B. Why do you think you couldn't?

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Replying to SteveHa:
By Paul D Utherone
27th Oct 2016 14:53

Only because I would expect HMRC in most cases to stand by their view that directors should register and submit returns regardless and hence refuse where a return has been issued - based on HMRC intransigence when trying to get a pensioner removed from SA. He was in SA historically due to having been in a partnership, but had retired and now has no net liability (in fact a refund due of £3 each year) but investment income >£10k. Nothing I could do would shake HMRC from the view that he must remain in SA as a result because he broke one of their cardinal rules for requiring a return, similar to that for directors

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Replying to SteveHa:
Red Kite
By Red Kite
28th Oct 2016 08:02

SteLacca wrote:

I've had late issue returns for directors with no SA liability withdrawn under S8B. Why do you think you couldn't?

Whilst your comment provides hope, it also clearly demonstrates the inconsistent approach by HMRC, which translates to a major concern?

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By SteveHa
27th Oct 2016 15:19

I suppose it depends on who you speak to. In particular on the ADL they are more likely to adopt a reasonable view than on general enquiry lines and correspondence.

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Replying to SteveHa:
By Paul D Utherone
27th Oct 2016 16:16

I know & that was what I hoped, but I was unlucky with the ADL and a follow up letter, just getting "the computer says no"

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paddle steamer
By DJKL
27th Oct 2016 16:30

Flagged

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By stephenkendrew
28th Oct 2016 10:07

Inconsistent indeed!

I've known HMRC argue this all the way to tribunal.

Earlier this year I had a case where a client became a director in August 2010 and HMRC claimed he should have registered for Self Assessment by 5 October 2011. We actually registered for SA in June 2015 - he needed SA302s for mortgage purposes so we wanted to submit a tax return.

HMRC claim they issued returns for the earlier years (which our client didn't receive) and charged penalties because they were not submitted on time.

We appealed against the penalties. HMRC upheld their original decision, as did the internal review. We then went to the First Tier Tribunal, where HMRC still argued the penalties were correct - all for £200!

We won in the tribunal and the penalties were cancelled!

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