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Directors Tax Returns

Directors Tax Returns

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My client was a director of a limited company.  We act for the company, but not her.  However, she has been issued with tax returns for 2011 & 2012 and not mentioned anything to us at all - until recently when she disclosed that she owed tax of £3,300 (penalties and interest) for these two years!

The company is her only tax return income, although it is not doing well.  For those years, she had a total salary of £5,000 and no dividends.  The only other income she has is WTC and child benefit, which obviously don't go on the tax return.

She resigned as a director of the company in July 2011.

What is the best way of approaching this?  I understand that although HMRC say that directors need to submit returns, there is no requirement under S7 of TMA 1970. I imagine if I call HMRC they will just say that the penalties are due - which seems like an expensive technicality.

Help please!

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By neileg
25th Apr 2014 10:30

What are you asking?

Are you going to act for this former director? Are you confident you are going to get paid?

If so, Job 1 is surely to prepare and submit the outstanding tax returns. s7 is irrelevant if HMRC have requested a return. HMRC are not going to do anything until the returns are with them.

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By stepurhan
25th Apr 2014 10:53

Argue the point

You could try getting the returns withdrawn on the basis that they should not have been issued. You will, of course, face HMRC's belief that all directors need to complete returns. Ask them for the statutory basis for that if they do. (There isn't one, so they won't be able to supply it) Even if you can overcome that issue then you still are stuck with the fact that, as neileg says, HMRC can request returns from anyone and may fall back on that.

Not guaranteeing you can get the returns overturned, but it is the easiest way of eliminating the penalties. No returns to file, no penalties for returns so it's worth a shot as you have nothing to lose.

To neileg's warning about ensuring you get paid I would add are you sure they are being straight with you? Even with WTC and child benefit, that is not much money coming in. Does that fit with her lifestyle, or is there other household income through a partner? Also, how did she "discover" the issue? If she has been receiving notices from HMRC and just ignoring them that weakens your position.

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