Hi, I am a director of a now non trading Ltd company. The company never made enough money to pay any salaries or dividends and only traded for just over a year.
My accountant says I am risking a fine by not completing a personal tax return, but I really don't see the point if I never made any money from the company.
Can anyone advise please?
Thanks,
Edna
Replies (16)
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You only have to complete a return if either of the following applies:
HMRC have issued you with a notice to complete a return;You will have an unpaid tax liability for the year.
Your accountant will be able to explain which of these reasons applies in your case and thus what the rationale behind his advice is.
This topic has cropped up a few times before but here's a summary of the position:
contrary to advice on HMRC's website and other publications there is no requirement to complete a tax return solely because you are a director, however,where HMRC has issued you with a notice asking you to file a personal self-assessment tax return you must submit one, where HMRC has not issued a notice you have to submit a return where you owe tax for the year in question.
pardon
There have been many postings here that quite catagorically state( correcetly) that contrary to the view of HMRC there is no statutory need to file a return just because you are a director
edit beaten to it!
Not enough information
The OP hasn't given any information about his financial circumstances other than those relating to this company.
urban myth
about directors. Tonycourt summarises it well.
http://www.hmrc.gov.uk/sa/need-tax-return.htm#1 is typical HMRC propaganda. The law is set out at sections 7 & 8 TMA 1970. I usually prefer to advise on the position in law rather than HMRCs spin.
Slight correction to tonycourt
Re. third bullet point. If HMRC have not issued a notice to file, but you owe tax for the year in question, then your obligation (so far) is limited to notifying HMRC of that fact. That notification is likely to result in HMRC then issuing a notice to file a tax return, particularly if you provide that notification by filing form SA1. But otherwise it is by no means certain. If the tax is small and capable of collection by PAYE coding adjustment then this would be an alternative route. Once they issue a notice to file in response to a notification of liability, then of course you are back to the second bullet point.
Re. second bullet point. If HMRC issue a notice to file when they should not have done so, I believe that there is now a route to having the notice revoked and thereby escape the requirement to file. I *think* that this came in as a means of diluting the effect of the late filing penalties shooting up from £100 to £1600. I feel on slightly shaky ground here - not sure if it only applies after the tax return is late. Anyway I don't think that this would help the OP, because if she was a director of an active company in the period, regardless of the financial amounts, HMRC will (on being aware of this) insist on the return.
With kind regards
Clint Westwood
Future relief?
You mention losing your savings in the project - if you supplied capital to the company be way of shares it may be possible to not only claim a capital loss but convert it into an income loss which, via a tax return, could salvage a repayment from the mess. If you lent money to the company that you lost this will also give rise to a capital loss, normally to be claimed within 6 years and the easiest way is through the medium of your tax return (although a stand-alone claim could be made) - this, unfortunately cannot be converted into an income loss. It may well be in your interest to file a return.
The current Finance Act does indeed contain provisions, by the way, for HMRC to withdraw the requirement to file a return if it is not necessary.
Doing a tax return
I think arguing with HMRC over whether a tax return is required would take more time than completing a simple tax return. Is it worth the effort?
You can get clearer than that.....
....HMRC are wrong and always have been on this point. The horse's mouth is the law not HMRC. Having said that in most cases a director will be required to make a return because they will either been sent a notice to file one by HMRC or have additional tax to pay.
Just because HMRC say so doesn't make it so
No. You definitely need to complete a Tax Return.
See HMRC's website at http://www.hmrc.gov.uk/sa/need-tax-return.htm where it says "You must complete a Tax Return if you are any of the following: (1) a company director".
You can't get clearer than that, it's straight from the horse's mouth.
HMRC are free to hold and express any opinion they like, but as a government agency their delegation of authority is limited to that laid down by statute.
HMRC have repeatedly been told that there is no statutory basis for someone to provide a return purely on the basis of being a company director.
That provision of returns by directors makes HMRC's life easier does not make it a law of the land.
Only parliament is empowered to make law.
@ Hugh Jego
The fundamental flaw in your post is the definition of horse.
The "horse's mouth" is parliament, not HMRC web-drivel.
Their statement is, as you say, a model of clarity. The problem is that clarity and accuracy do not necessarily coincide.
With kind regards
Clint Westwood