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"Chargeable to income tax"?

Under S7, TMA 1970, what is the meaning of "chargeable to income tax"?

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I had a question today as to whether someone with self-assessment income of less than £5,000 would need to file a tax return. My answer was yes, but it sparked an internal debate I have had since the Mohammed Salem Kadhem v HMRC (2017) tribunal decison showed directors do not need to file return (contrary to HMRC guidance) unless they have untaxed taxable income or receive notice to file a return. That is what counts as taxable income?

 

The s7, TMA 1970 states "every person who is chargeable to income tax" should notify HMRC of their chargability and then submit a return. However, is income covered by a personal allowance "chargeable to income tax"? In the same way that employment income paid under PAYE is outside the scope of "charegable to income tax", if there is no tax to pay (or in the case of the PAYE, additonal tax to pay) due to a personal allowance , then is a tax return required?

 

I suspect that on these levels of income that:

  1. HMRC would not pursue if they found out as there are no taxes underpaid and they have very little in the penalty mechanism to punish someone with no tax to pay, or
  2. The individual would not appeal if they were issued with a notice as it would be easier and cheaper to just file a return, plus
  3. Most advisors would not waste valueable time thinking about it (like I have), although I am now asking several more to consider...

 

I have ignored the National Insurance issues here, but of course the amount in question is below the Class 2 annual threshold, so I am not worried about that. Mind you, until recently, I suspect registering for Class 2 would not have meant the self-assessment office automatically realise there was a return to issue.

 

Anwyay, I welcome people's thoughts on this academic matter.

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By Justin Bryant
13th Apr 2018 13:36

Depending of the facts, arguably not. See para 31 here:

http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC06269.html

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By Portia Nina Levin
13th Apr 2018 13:47

Employment income paid under PAYE is not "outside the scope" of being "chargeable to income tax". It is just that notification is not required in relation to such income, by virtue of s 7(4) and (5).

All taxable income is chargeable to income tax. Notification may not be necessary, if it falls within one of the types in s 7(4) to (7).

The income you describe is likely to not require notification by virtue of s 7(7).

Linkman hasn't bothered to read s 7, to understand the rationale of paragraph 31.

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Replying to Portia Nina Levin:
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By Justin Bryant
13th Apr 2018 16:29

Yes, I was answering a different (more interesting) question re s8 link to s7 (as as you know I like links).

A possibly more interesting case of this link (by the same judge) is here:

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j10250/TC0...

The more boring question re s 7 notification analysis is in this case:

http://www.bailii.org/uk/cases/UKFTT/TC/2018/TC06320.html

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