Greetings,
In the past couple of years I have opened my limited company to provide consulting services, where I operate as a sole consultant with no employees.
I have since paid myself with dividends, I did not set up a PAYE or a small salary, I do not have liabilities or capital gains to declare; I regularly and dutifully pay my Corporation Tax. Being at the beginning, I am still talking about a small turnover below 30K.
I have not been issued a request by HMRC to complete a Self Assessment, and I am aware of the online debate concerning this topic. Still, I am conflicted on whether or not I should spontaneously do so (file an SA), thus to not incur into troubles later on, or if indeed wait until I am issued with one directly by HMRC.
Your help would be highly appreciated. Thanks!
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Replies (12)
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You do not need to submit a return unless you have received a notice from HMRC requiring you to do so, or you have an unpaid tax liability for the year.
Company Director?
Don't Directors of for-profit companies generally have to complete a self-assessment return regardless of whether they take a salary?
@ Simbif
Based on what you've said, the only reason you'll need to file a SA is if your gross divi (net divi rec'd / 0.9) pushes you into the higher tax threshold.
re,. the OP
I am not aware of there being any "online debate" about it. Views are unanimous.
With kind regards
Clint Westwood
Or HMRC asks
As John has already said, if you receive a notice from HMRC to file a tax return, you are required to do so. HMRC can request a return from anyone, even if no tax is at stake.
So if you do get a notice to file in future, don't ignore it on the basis you have no taxable income to declare. Whilst you can usually persuade HMRC to withdraw the notice for other taxpayers, they are convinced (incorrectly) that directors should do returns so once you receive a notice you are stuck with doing one.
From HMRC pages
You're a company director, minister, Lloyd's name or member
You must complete a return if you're any of the following:
a company director (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)a minister of religion (any faith)a name or member of Lloyd's
Again
You're a company director, minister, Lloyd's name or member
You must complete a return if you're any of the following:
a company director (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)a minister of religion (any faith)a name or member of Lloyd's
And as my previous post (and others') have stated - HMRC guidance is not the law.
There is no law that states a director must complete a tax return unless he is issued with one.
HMRC policy versus the law
You're a company director, minister, Lloyd's name or member
You must complete a return if you're any of the following:
a company director (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)a minister of religion (any faith)a name or member of Lloyd's
Whilst it is often HMRC policy to send company directors a notice to complete a self assessment tax return, there is nothing in law that automatically requires all company directors across the land to complete one. HMRC's website is somewhat misleading in this respect.
In the first response on this thread, Johngroganga listed the only two circumstances in which a company director is legally required to complete a self assessment tax return.
If a company director neither receives a notice to complete a return, nor has an outstanding tax liability then there is no legal whatsoever obligation to file one ... and he / she cannot be penalised for this.
The problem is...
...there is no legal definition of who or what is a director. You can call yourself a director and register this at Companies House, include this in the accounts or put it on your letter heading. You can have the job title of director even if your powers and duties in respect of your employing company make it clear that you are not. You can even claim to be a director when you are not so long as you don't claim to be a director of a particular company.
So for HMRC to require directors to complete returns they would need a statutory definition of a director. But there isn't one, so they can't.
Paying tax on large dividends
Hi, I have a client that is turning over 1m in first year and he is paying himself 3k a month and already 25k in dividends. I believe he should pay tax on this but cant really find the answer, other than doesn't need to end in an SA return if not requested. Surely there is a liability to pay tax at whichever rate the total becomes i.e. if he takes 100k in the year? Really appreciate some help as Google not helping me. Thanks