Directors & Tax Returns

Self assessment criteria

Didn't find your answer?

I know this has been done a million times, but..........

Client reads on HMRC website that directors need to complete a Tax return.  He phones HMRC, they issue a Return & he doesn't complete it (God knows why).  Late filing penalties are charged.  We ask for the notice to file to be withdrawn on the basis that he has no chargeability and the return was issued in error.  HMRC refuse on the basis that he requested the Return & now has a legal obligation to submit it.

They go onto say that as part of a wider HMRC transformation agenda they are considering which customers are required to complete a Return in the future & company directors will fall into this review.  No decision is likely in the short term but in the interim any customer issued with a notice under s8a TMA 1970 should comply with the legal obligation to complete the return.

My view is that the client registered for SA based on factually incorrect information on the website.  The return was issued in error, whther he requested it or not, and should be withdrawn.  The fact that in future HMRC may decide all directors need to complete a return is irrelevent.

Any suggestions on how to respond?

 

 

 

Replies (38)

Please login or register to join the discussion.

By Duggimon
23rd Mar 2018 11:55

I would suggest your client might be an idiot and the penalty for being an idiot is £100.

Nothing you have said is wrong but on reading the website your client should have turned to his tax adviser and said "do I need to do this?". He did not.

Furthermore, knowing full well that he had done this and knowing full well he had not mentioned it to you, he didn't do anything with the return.

If I was HMRC I would refuse to withdraw the penalty as well.

Thanks (8)
Oaklea
By Chris.Mann
23rd Mar 2018 11:58

Your client has an obligation to complete the Tax return, once he/she has been sent a notice to complete a return.
You could review this http://www.markmclaughlin.co.uk/withdrawing-notices-to-file-tax-returns/ but I would doubt success.
How difficult would it have been to prepare and submit the return, within the time limits?

Thanks (0)
avatar
By Wall1690
23rd Mar 2018 12:14

This relates to 15/16 & at the time he didn't have an accountant. I've no idea why he didn't complete the Return & he now owes £1,300 in penalties.

However, he was deliberately misled by HMRC into believing that he had to register for self assessment. The advice on the HMRC website is factually incorrect & as a result the Return was issued in error. For the sake of £1,300 is it worth pursuing?

Thanks (0)
RLI
By lionofludesch
23rd Mar 2018 12:22

Agree with Duggimon that your client is an idiot.

However, he is only an idiot in that he believed HMRC's incorrect advice that he had to file a return because he was a director.

Point out to HMRC that he only requested the return because HMRC told him, via the website that he was obliged to complete a return. There's only so far you might want to go to save £100 penalty, obviously, but personally, I think HMRC have a bit of a cheek here and I'd gain some comfort in saying so.

Thanks (2)
Replying to lionofludesch:
ALISK
By atleastisoundknowledgable...
23rd Mar 2018 12:26

“ HMRC told him, via the website that he was obliged to complete a return”

Do we know the website wording? I doubt it is quite so black & white, it probably says/said something more like “may be required”, which sounds more the sort of thing HMRC would say.

Thanks (0)
Replying to atleastisoundknowledgable...:
RLI
By lionofludesch
23rd Mar 2018 12:33

Can't be bothered to look it up but it's more along the lines of ".... you are required to file a tax return if you are a company director".

Much discussed on here over the years.

Thanks (0)
Replying to atleastisoundknowledgable...:
By mrme89
23rd Mar 2018 12:33

atleastisoundknowledgable... wrote:

“ HMRC told him, via the website that he was obliged to complete a return”

Do we know the website wording? I doubt it is quite so black & white, it probably says/said something more like “may be required”, which sounds more the sort of thing HMRC would say.

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

Section 2

Who ‘must’ complete a tax return.

you were a company director - unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car.

Thanks (2)
Replying to mrme89:
RLI
By lionofludesch
23rd Mar 2018 12:48

Not exactly open to doubt, is it ?

An authoritative, though inaccurate, statement of the law.

Thanks (0)
Replying to lionofludesch:
avatar
By backtothefuture
24th Mar 2018 22:58

May be an idiot and not an idiot.

Thanks (0)
ALISK
By atleastisoundknowledgable...
23rd Mar 2018 12:23

I say it’s a lessen that he shouldn’t have asked to be taught.
If I was HMRC, there’s no way I’d withdraw it - he asked to SA, they just complied with his legal request.

Thanks (0)
By SteveHa
23rd Mar 2018 12:34

I wrote to HMRC on 5 March this year requesting withdrawals of notice to file for 2014/15 and 2015/16 for a client, who was a company director for a part of the period covered.

Whilst I haven't yet received formal confirmation, a check at SA online this morning suggests that they have, indeed, been withdrawn, and so HMRC are still acting on proper S8B requests.

Thanks (1)
avatar
By Wall1690
23rd Mar 2018 12:40

I agree he's been an idiot but £1300 is at stake & the stance taken by HMRC is grossly unfair.
They seem to suggest that as at some point in the future they intend to issue all directors with Tax returns, this view can be taken retrospectively & the legislation at s8a TMA 1970 has therefore been withdrawn.

Thanks (0)
Replying to Wall1690:
RLI
By lionofludesch
23rd Mar 2018 12:52

Oh ?

And on whose authority has this legislation been withdrawn ?

And - crucially - when ?

Thanks (1)
Replying to Wall1690:
Tornado
By Tornado
23rd Mar 2018 13:22

"They seem to suggest that as at some point in the future they intend to issue all directors with Tax returns"

That would be interesting, especially for tens of thousands of people who are unpaid Directors of non-trading companies such as Flat Management Companies or even Dormant Companies.

Thanks (1)
Replying to fawltybasil2575:
By SteveHa
23rd Mar 2018 13:53

I'm sure it's just a typo - but (4) should refer to S.8B TMA 1970, not 6B.

Thanks (1)
Replying to fawltybasil2575:
avatar
By andy.partridge
23rd Mar 2018 14:33

Well done, Basil.

Thanks (1)
avatar
By AlgernonB
23rd Mar 2018 13:26

Good luck with that one. The easiest way to deal with a Tax Return is to complete it and file it, on time.

Thanks (0)
Replying to AlgernonB:
RLI
By lionofludesch
23rd Mar 2018 13:45

Great advice but it comes a bit late.

If only you'd said that 18 months ago .........

Thanks (0)
By Paul D Utherone
23rd Mar 2018 14:15

Have a look at the following:

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

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j10082/TC0...

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j9898/TC05...

http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC05725.html

http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC05744.html

All First Tier so set no precedent and a selections of wins & losses by HMRC so take your pick of the bones of them and see if there's anything there that might help your arguments with HMRC

Thanks (2)
avatar
By Wall1690
23rd Mar 2018 14:43

I've written to HMRC & will let you know what they say.

They say the client phoned & asked to be registered. He didn't. He phoned and asked if he needed to be & he was incorrectly advised that he needed to register for SA simply because he was a director. In my view the Return was issued in error (HMRC error) & therefore legislation is in place for the notice to be withdrawn.

Thanks (1)
Replying to Wall1690:
avatar
By thehaggis
25th Mar 2018 20:55

The return was not issued in error.

S8 does not determine who should be asked to make a return, it simply says that anyone who gets a notice to do so, must do so.

A notice is given by HMRC, therefore it is HMRC who decide who should get a return. HMRC's published policy is that directors will be given a notice. The notice was given therefore a return must be made.

S8B gives a discretion to withdraw a notice. That discretion lies with HMRC, not the Tribunal.

However, HMRC are not good at defending penalty appeals before the FTT. They usually forget that the responsibilty lies with them to show that the penalty is payable, and Tribunal Judges are getting more insistent on them fulfilling their burden of proof. There is a better than even chance of winning (depending on the Judge).

Geraint Jones sums it up here: http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=10337

Thanks (1)
avatar
By pauljohnston
26th Mar 2018 11:02

Not with standing the advice here we now carry out a check 3-4 months after taking a new client on (looking at our account at HMRC). The check is to make sure that we are aware if there are any outstanding tax returns that ought to have been submitted.

We started this regime when a client forwarded two penalty notices for non-submission. The system appeared not to issue a request for a tax return for previous years. Subsequently a further client had the same experience.

Why oh why can not HMRC send us a schedule of the tax returns requested just as it does for Corp Tax.

Thanks (1)
Replying to pauljohnston:
avatar
By Matrix
26th Mar 2018 13:59

How do you get them on your agent list without a UTR? Do they all complete a 64-8 with their NI number?

Thanks (0)
avatar
By b.clarke
26th Mar 2018 11:12

I have a further wrinkle to add to this tangled web (mixed metaphor, I know, sorry).

My client is a director of his own company. He has received a letter from HMRC:

"We're writing to let you know that the last Self-Assessment (SA) tax return you'll need to complete is for the year ended 5 April 2017."

As noted in this thread, this contradicts the advice on HMRC's website.

It goes on to say "If your circumstances change, you can easily view and update your tax information online at any time using your Personal Tax Account (PTA)..."

This is form letter SA251.

Now I'm going to have to have a further conversation with him...

Thanks (1)
avatar
By Mr J Andrews
26th Mar 2018 12:45

There's so much irrelevance here.
He's a director..........He asked for a return.......He has no chargeability.........HMRC are conducting a wider transformation agenda
{This in itself is a load of shmuck}.......
FACTS
HMRC issued a tax return.The idiot failed to comply. Penalty - pay up and move on.

Thanks (0)
Replying to Mr J Andrews:
RLI
By lionofludesch
26th Mar 2018 12:53

Mr J Andrews wrote:

HMRC issued a tax return.The idiot failed to comply. Penalty - pay up and move on.

Yeah but HMRC issued the return after misleading the taxpayer into believing he needed to submit one.

It's akin to the cowboy builder telling you your chimney needs repointing or it'll fall through the roof.

It's a cheap con trick.

Thanks (0)
Replying to lionofludesch:
avatar
By whitevanman
26th Mar 2018 15:47

Lionofludesch says the client was mislead into believing he had to file a return. Please read the legislation and the comments from J Andrew's to whom you replied. The client was not mislead. He has an obligation to file because he has been served with a notice. HMRC decides who will be asked to file and their guidance is that Directors will be required to do so. End of story.
You can appeal the penalty but need to show that the client had a reasonable excuse for failing to do so. Hard to see that he had such when HMRC told him he had to file!

Thanks (0)
Replying to whitevanman:
By SteveHa
26th Mar 2018 16:03

Not so. Read my earlier reply. I (and others) have had S8 notices successfully withdrawn using S8B for directors, and the penalties go with the requirement as a matter of course.

Whilst you are technically correct if you ignore 8B, 8B is there for a reason, and should be at least tried if appropriate.

Thanks (1)
Replying to whitevanman:
RLI
By lionofludesch
26th Mar 2018 16:35

whitevanman wrote:

Lionofludesch says the client was mislead into believing he had to file a return. Please read the legislation and the comments from J Andrew's to whom you replied. The client was not mislead. He has an obligation to file because he has been served with a notice. HMRC decides who will be asked to file and their guidance is that Directors will be required to do so. End of story.


I dunno how closely you've been following this thread but HMRC issued this return because the taxpayer asked for it because he was incorrectly told he needed to file a return.

Setting aside the issue of whether it was smart play to leave the return on the cornish once he'd received it, the taxpayer has been given misleading information by HMRC. Yes - he was mislead. I'll go further. HMRC lied to him.

Thanks (0)
Replying to lionofludesch:
avatar
By whitevanman
26th Mar 2018 17:03

I don't understand why you think the client was mislead or lied to. He phoned to register and was told he had to file. That was correct. The client / agent has subsequently been told that HMRC may at some future point revise it's approach and by implication may not in every case require directors to make returns but that does not affect the client because no decision had yet been taken. At the time he was told what the guidance said and that was HMRC practise. He was given a notice to file and failed to do so despite having been told by HMRC that he had to file.

Thanks (0)
Replying to whitevanman:
RLI
By lionofludesch
26th Mar 2018 17:21

whitevanman wrote:

I don't understand why you think the client was mislead or lied to. He phoned to register and was told he had to file. That was correct.

Woah ! Let me stop you there.

What was correct about it ?

Thanks (1)
Replying to lionofludesch:
avatar
By whitevanman
26th Mar 2018 19:06

A better question would be "what was incorrect about it"?
There is nothing in legislation about who does have to file, other than the simple rule that anyone who is served with a notice must do so.
Everything else is just HMRC guidance to staff about how it will expect them to apply the legislation.

Thanks (0)
Replying to whitevanman:
RLI
By lionofludesch
26th Mar 2018 19:13

Well, I suggest you review the myriad threads on this forum on the matter.

Few on here will agree with you.

Thanks (1)
avatar
By SXGuy
26th Mar 2018 13:33

Would have been easier to say your client was mentally unwell.

Not implying you should. Just making an observation

Thanks (0)
avatar
By Practicaledd
26th Mar 2018 16:10

We registered a client for 2017, which was submitted on time, however, he didn't mention that HMRC had automatically issued notices for the previous two years as well (since he became a director).

Two £100 pound penalties later I thought we might as well try getting them withdrawn as they were entirely unnecessary and.......success. Just a 5 minute phone call and the penalties went away with the returns.

Not sure if it would help given the less favourable circumstances in your case but it might be worth a try.

EDIT: just read your post again, should have had my cup of tea first. Oh well, it can work sometimes at least!

Thanks (0)
avatar
By Wall1690
21st May 2018 12:52

HMRC have now withdrawn the notice to file & cancelled the £1,300 penalties.

Thanks (0)
Replying to Wall1690:
By Paul D Utherone
21st May 2018 13:05

Wall1690 wrote:

HMRC have now withdrawn the notice to file & cancelled the £1,300 penalties.


Good news! Congrats with the success in finding the HMRC employee who looks beyond "computer says noooo"and getting them withdrawn
Thanks (0)
Replying to Wall1690:
avatar
By Tax Dragon
21st May 2018 20:34

Thank you for both starting and concluding an excellent thread. And a great result to boot.

Thanks (0)