This Old Chestnut gets its annual airing... is a director liable to submit a tax return simply by virtue of being a director?
Director has minimal salary (£883 month) - small amount of divs from own company, and zero P11d expenses (expenses are 100% motoring @ 45p mile); basic rate taxpayer by a long margin; no other income / benefits / interest; no UTR even.
Zero P11d expenses means of course no need for an S.A. Return's Box 17 claim for allowable "business travel and subsistence expenses". So the only obvious reason for submitting an S.A. return would be to avoid a (non-) filing penalty. Is that an issue, or do HMRC still not fine directors who they haven't actually asked to file a return?
Replies (46)
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There is no legal requirement to file a return just because he is a director.
If HMRC ask for one then he must file.
If HMRC attempt to fine him for not submitting one when they have not asked for one, they are in the wrong.
Penalty notice received...
There is no legal requirement to file a return just because he is a director.
If HMRC ask for one then he must file.
If HMRC attempt to fine him for not submitting one when they have not asked for one, they are in the wrong.
Our client was a director in 2014/15. His only income was taxed under PAYE (£4,000). The client did not register for Self Assessment and HMRC did no ask him to submit one.
Today he received a SA Penalty Notice (the Tax Reference on the letter is his NIN).
I phoned HMRC and was informed that he HAD to submit the TR because he was a director in 2014/15. The lady wasn't interested in the fact that the client did not receive a Notice to Submit TR, she said it is irrelevant. She then "kindly" offered to send us clients' UTR, so the TR can be submitted.
Has anyone had a similar issue?
First Stop
There is no legal requirement to file a return just because he is a director.
If HMRC ask for one then he must file.
If HMRC attempt to fine him for not submitting one when they have not asked for one, they are in the wrong.
Our client was a director in 2014/15. His only income was taxed under PAYE (£4,000). The client did not register for Self Assessment and HMRC did no ask him to submit one.
Today he received a SA Penalty Notice (the Tax Reference on the letter is his NIN).
I phoned HMRC and was informed that he HAD to submit the TR because he was a director in 2014/15. The lady wasn't interested in the fact that the client did not receive a Notice to Submit TR, she said it is irrelevant. She then "kindly" offered to send us clients' UTR, so the TR can be submitted.
Has anyone had a similar issue?
Lodge an appeal on the grounds client didn't receive a notice to complete and see what the response is. You can never be certain that the client didn't get a notice to complete and just did not realise what it was and binned it or lost it in his junk mail paper mountain.
The HMRC lady is however wrong on two levels. If no notice to complete was issued, then by her own logic, the penalty should be failure to notify, not a late filing penalty! The penalty for which is limited to the tax unpaid at 31 January, so no penalty in your case.
Just being a director does not require a SATR, so for a late filing penalty a SATR has to be issued or a notice to complete issued.
I do however suspect that the client's UTR is shown on the penalty notice. It will appear on the payslip itself, in the box on the left.
Now you have a UTR, look online and see if a SATR is showing as having been issued.
And...
... when?Now you have a UTR, look online and see if a SATR is showing as having been issued.
No UTR...
I do however suspect that the client's UTR is shown on the penalty notice. It will appear on the payslip itself, in the box on the left.
Now you have a UTR, look online and see if a SATR is showing as having been issued.
Unfortunately, the client's UTR is not on the penalty notice. There is no payslip - only a small section at the bottom of the letter saying "Paying HMRC - Ways to Pay".
This is a Good Thing
I do however suspect that the client's UTR is shown on the penalty notice. It will appear on the payslip itself, in the box on the left.
Now you have a UTR, look online and see if a SATR is showing as having been issued.
Unfortunately, the client's UTR is not on the penalty notice. There is no payslip - only a small section at the bottom of the letter saying "Paying HMRC - Ways to Pay".
So he doesn't have a UTR ? So surely, a SA return can't have been issued.
I'm just off to the pub..
All directors have to submit tax returns. It says so on the internet.
so I'll ask around!
This should be a banner headline on "Any Answers" to avoid it being asked and discussed twice a day.
Oddly enough
This should be a banner headline on "Any Answers" to avoid it being asked and discussed twice a day.
Oddly enough I asked for that in the recent AWeb survey.
Fine
"...or do HMRC still not fine directors who they haven't actually asked to file a return?"
Seriously - do we know of any instances, even anecdotal, where HMRC have issued a penalty notice for a director failing to register ? Never come across it myself.
Yes I have
"...or do HMRC still not fine directors who they haven't actually asked to file a return?"
Seriously - do we know of any instances, even anecdotal, where HMRC have issued a penalty notice for a director failing to register ? Never come across it myself.
Yes I have. For a director who had a liability. Because he had a liability. Because the penalty is a percentage of that liability. His directorship was coincidental.
It is axiomatic that no penalty would be charged in cases where there is no liability. Who would waste time for raise a tax-based penalty of £0? Come to think of it, I suppose I have seen a few of those in my time.
With kind regards
Clint Westwood
Had a liability
Yes I have. For a director who had a liability. Because he had a liability. Because the penalty is a percentage of that liability. His directorship was coincidental.
If he had a liability, he should have notified. Nothing to do with being a director.
I was looking for a case where there was no liability and HMRC charged a penalty.
As you point out - surely it cannot be.
This thread
https://www.accountingweb.co.uk/anyanswers/question/late-tax-return-pena...
Suggests that they have backdated the requirement when a director did eventually have a liability and registered, but had no liability in the previous three, to cover the previous three years with nil liability and charged penalties. But there's surely something wrong with that picture as the registration penalty is only tax based - not fixed/daily like the filing penalty - so if there was no liability in the previous three years what was the penalty for, unless they required returns and the nil returns were submitted more than 3 months after the notice was issued?
Re dividend tax
Be aware when you register directors for next year for the dividend tax. If you use the actual date of appointment the revenue will demand returns for the years from appointment.
Registration
Be aware when you register directors for next year for the dividend tax. If you use the actual date of appointment the revenue will demand returns for the years from appointment.
The simple answer to that is to tick the box to say that you are registering because of untaxed income. You do not tick the box about being a company director because that is not the reason that you are registering.
No Trading No Salary - Line of least resistance.
Be aware when you register directors for next year for the dividend tax. If you use the actual date of appointment the revenue will demand returns for the years from appointment.The simple answer to that is to tick the box to say that you are registering because of untaxed income. You do not tick the box about being a company director because that is not the reason that you are registering.
In all my cases HMRC have been willing to accept ("just a minute I'll check my guidance") that if the company hasn't started trading, or if it has and there is no salary or dividend - they withdraw the requirement over a telephone call - and they answer straight away - so that's easily the quickest way of moving on.
Fortunately I haven't as yet had to argue that they are just wrong.
It cannot be for the simple reason that there is no legal requirement for anyone to register for self-assessment by virtue of being a director. The HMRC website is in my view outrageous in implying this is the case.
I have 40 or so director clients who have not been filing SA returns over the past 3 or 4 years, since they have no tax liabilities. I will be registering all of them from 6 April 2016 in order to pay the dividend tax.
Dividend Tax
When registering the director for SA they ask for the date of appointment. If you enter the correct date they issue a notice to file for every year since the date of appointment, this has happened to two of my clients recently . I have written to the revenue explaining the position and as yet have not had a reply. I either file the returns or wait for a reply and risk late filing fines
Surely if they have issued the returns late...
...you have three months from the date they do so to submit, so you either: When registering the director for SA they ask for the date of appointment. If you enter the correct date they issue a notice to file for every year since the date of appointment, this has happened to two of my clients recently . I have written to the revenue explaining the position and as yet have not had a reply. I either file the returns or wait for a reply and risk late filing fines
get the nil returns ready for submission within the three month window, ask for the requirement to be withdrawn under s8A (which will almost certainly be refused by HMRC as they are a director) and if no response has been received before the deadline submit them so that there is no filing penalty; orprepare the nil returns and submit them straight away
HMRC cannot backdate the requirement to submit a return so you have three months from the date they do so to submit. They can request returns for earlier years, but any penalty will be for late registration (so long as you submit within three months), and that is tax based (see legislation & fact sheet CC FS11 and Manuals) so if the liability is nil the penalty is nil.
I would suggest that if you try to get the requirement to submit withdrawn, fail and submit after three months (so late) then you will get the late penalty and have an uphill struggle getting it cancelled even up to Tribunal (as in the Fisher case I linked above). And while HMRC are supposed to operate a light touch on penalties with a reasonable excuse (i.e. there was no liability so no need for me to register and submit returns) I wonder whether they will still not throw back "our guidance is that all directors have to submit a return so you have no reasonable excuse for failing to do so when we ask" again meaning you would have to take it further up the line to FTT to test the requirement, for which you will need to present a timeline of immediate action once the earlier years returns were required showing why you did not just submit nil returns in three months (Fisher again).
Another link for you
http://www.bailii.org/uk/cases/UKFTT/TC/2014/TC03930.html
Look at para 5 under Background, that apparently went unchallenged, but it is only FTT. Sad to see HMRC's view quoted as "...circumstances in which a taxpayer will always need to complete a Self-Assessment Tax return...". We could do with an appeal against a late notification penalty for a director for a year where there's no liability, & they weren't registered so no return was issued to test this and put it to bed really
Why register?
If you do not fulfil the requirements for SA before they invented the dividend tax, why would you do it now?
Any liability should be capable of the usual PAYE treatment, a letter with the calculation and no risk of penalties
@ Cloudcounter & Marion Hayes
Cloudcounter
But then of course there's a tick box to say you're a director on the employment pages when you fill them in next year so even if you don't say so when you have to register because of dividends in coming years it is going to come out when you tick that box later on
Marion
Because presumably if you are still on a low salary no tax / high dividend route there may well be tax to pay that a coding adjustment cannot handle - though the new option HMRC are getting to raise assessments and not have to issue returns in all cases ought to cover it - though they will still presumably fall back on "you're a director and we say you have to do a return"
Not the date of appointment
Cloudcounter
But then of course there's a tick box to say you're a director on the employment pages when you fill them in next year so even if you don't say so when you have to register because of dividends in coming years it is going to come out when you tick that box later on
But the date of appointment as a director isn't put on the employment pages. So it isn't "going to come out" when you file the return
But...
No but it's easy enough to look on CH so it might. Anyway whatever happens it should be easy enough to manage with no earlier year penaltiesCloudcounter
But then of course there's a tick box to say you're a director on the employment pages when you fill them in next year so even if you don't say so when you have to register because of dividends in coming years it is going to come out when you tick that box later on
But the date of appointment as a director isn't put on the employment pages. So it isn't "going to come out" when you file the return
Possibly
Although I hate to volunteer for something that is just wrong!!
My personal preference is to send a cheque with the letter but I know many people will not want to do that
Tax return necessary for Director
Over the years two of my director clients have received letters from HMRC stating they are no longer required to submit s/as - they are still Directors!
happens
Over the years two of my director clients have received letters from HMRC stating they are no longer required to submit s/as - they are still Directors!
This usually happens because you failed to repeat the tick in the employment page reiterating director status.
With kind regards
Clint Westwood
Dividend tax
I'm thinking that most of my director clients will need to report their dividends from 2016 so much of this discussion will be obsolete.
Other possibly
...than the potential for HMRC to suddenly require unnecessary returns for earlier yearsI'm thinking that most of my director clients will need to report their dividends from 2016 so much of this discussion will be obsolete.
So ultimately it will be
Marion Hayes "personal preference is to send a cheque with the letter" if that's what you are happy to do and wait to see if HMRC pick up on the directorship and put the client into SA, and issue returns for earlier years due to the directorship; orRegister for SA for the first year it is relevant as there is a further liability, and again wait to see if HMRC issue returns for earlier years due to the directorship
If HMRC register the client for SA and decide to require returns for previous years because of the directorship
prepare nil returns ready to submit but try to get HMRC to withdraw under s8A as nil liabilities & not required, but be ready to submit anyway within 3 months of the notice to file being issued; orprepare nil returns and submit to HMRC straightaway
In either event there is no late filing penalty, and no late notification penalty as there';s no liability. Arguing the toss otherwise just runs the risk of late filing penalties that will need to be appealed at cost and with an unknown chance of success.
Perhaps in the future Digital Tax Accounts and HMRC proposed new power to raise assessments on straightforward cases will mean that returns will not be issued, but that would require not only RTI of a low salary and a return by the company of dividends paid and to whom for HMRC to be able to tie up the detail to the tax account...so don't hold your breath
Do you
seriously think that HMRC are going to look at the return, notice that there is income from a directorship and go digging round Companies House records?
Who knows
? Stranger things have happened :)seriously think that HMRC are going to look at the return, notice that there is income from a directorship and go digging round Companies House records?
CH Feeds to HMRC
seriously think that HMRC are going to look at the return, notice that there is income from a directorship and go digging round Companies House records?
CH Feeds to HMRC are increasing all the while - this will only increase.
In one of my conversations on this, the helpdesk said, "they're starting to come through now." It doesn't mean that was accurate - but I think indicative.
One of my clients very recently changed from Ltd to CIC - and that is already fed to HMRC.
I wonder....
seriously think that HMRC are going to look at the return, notice that there is income from a directorship and go digging round Companies House records?
CH Feeds to HMRC are increasing all the while - this will only increase.
In one of my conversations on this, the helpdesk said, "they're starting to come through now." It doesn't mean that was accurate - but I think indicative.
One of my clients very recently changed from Ltd to CIC - and that is already fed to HMRC.
If one day CH & HMRC will merge? Annual return as part of the CT600 form and two sets of accounts IXBRL'ed to it.
Already merged
If one day CH & HMRC will merge? Annual return as part of the CT600 form and two sets of accounts IXBRL'ed to it.
As far as I can see, they're already merged.
They're both part of the Government.
HMRCs Connect system is already doing stuff like this. Among other things it cross-checks XBRL accounts submitted to CH and compares them to XBRL accounts submitted to HMRC, to make various comparisons of asset/liabilty figures. It also uses CH info to look up directors and shareholders to check that dividends paid in a company XBRL accounts submitted to HMRC match the dividends declared by individual taxpayers. Apparently it uses names, dates of birth and addresses to match individuals to officer/shareholder records etc. With all the numbers now tagged, it's just data mining. The sort of clever stuff that Tesco and Facebook and the like have been doing for years to "learn" about us.
I agree with lion that this discussion will now be obsolete, I have kindly not registered Director clients where no tax liability before but I am not going to turn down the fees for the additional tax returns (going forward, not retrospective).
I also agree with Robert - one of my Director clients was de-registered from SA.
Just put 6 April 2016 as the Director start date.
Nope, but I'd appeal on the grounds that no Return is required. Tell them that if they can't agree you'll move immediately to FTT.
Once again
do beware of - http://www.bailii.org/uk/cases/UKFTT/TC/2014/TC03930.html - It's First Tier and sets no precedent but the Background comment 5 is worrying and you'd want to make sure that this was clearly challenged if you did get as far as Tribunal
Apparently he does...
When I spoke to HMRC, the lady said that she will send him a letter with his UTR by post, so he must have one, but it is not shown on the penalty notice.
Appeal
Would the fact that client has not received a "Notice to Deliver Tax Return" be a good enough reason to appeal the penalty?
Of course
Would the fact that client has not received a "Notice to Deliver Tax Return" be a good enough reason to appeal the penalty?
Of course. That would be the crux.
But it's difficult to prove a negative.
I'd appeal anyway. but first, I'd go along the route of the return shouldn't have been issued.
Then I'd follow up with the not received (not, maybe more important, not expected) route.