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For many years, the question of whether or not a director is required to register for self assessment and complete a tax return has come up again and again, largely due to the inaccurate guidance on Gov.uk and HMRC's insistence that company director's are required to do so. HMRC insist all directors must register for self assessment and complete a director’s tax return, even if there is no income to report.

This requirement is not imposed by law, but it is endlessly repeated by the HMRC as it has been included in the HMRC and gov.uk guidance. The position of a “no income” or a “no income other than PAYE” director has been tested in several cases before the first-tier tribunal.

The good news is that HMRC have finally changed their guidance on directors’ tax returns. The tool on gov.uk that helps a person decide whether they need to complete a return now results in “You do not need to send a self- assessment tax return” even if the person is a director, as long as their income is below £50,000, and they have no other taxable income.

Guidance Changed by HMRC on Director’s Tax Returns

This new approach by HMRC was announced in the Agent Update issue 69 published on 12 December 2018, but the gov.uk guidance was changed at least a week before that publication was released.

What HMRC guidance states?

  • Many company directors are taxed under PAYE and so will not need to give notice of liability to tax, provided they have no other untaxed income.
  • HMRC can choose to issue a notice to file an SA return (under section 8 Taxes Management Act 1970) to any individual. Anyone receiving a notice to file a tax return must do so by the required deadline, or they may be liable to a late filing and/or a late payment penalty.
  • If an individual has received a notice to file and has no other taxable income to report, they can ask for the notice to file to be withdrawn. However, HMRC may decide that they still require a return and if so, the return must be submitted, otherwise penalties may be incurred.

At last, the gov.uk guidance on directors’ responsibilities no longer refers to completing a director’s tax return. Go on; spread the good news amongst your network.

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