After several recent tribunal cases on the subject HMRC have amended its guidance about whether a director has to file a tax return.

The guidance now states that where all of a director’s income is taxed at source and there is no further tax to pay, they do not have to register for and file a self-assessment return.

As many company directors are taxed under PAYE they will not need to give notice of liability to tax.

If they have received a notice to file a return and have no other taxable income to report, they can ask for the notice to file to be withdrawn. If however HMRC decide that they still require a return then one must be submitted or late filing penalties may be due

Do I need to file a self assessment tax return? What if I am a director? Can HMRC make directors file tax returns? When should I file a self assessment return?

There are three circumstances in which you should file a UK self assessment return, where you:

  • Have capital gains or income to report and you must also notify chargeability.
  • Are sent a notice to file by HMRC
  • Wish to claim a refund or make a claim for relief.

1. Have capital gains or income to report: you must also notify chargeability

You must notify HMRC of chargeability to tax, HMRC then sends you a notice to file a tax return.

Alternatively, if HMRC has not sent you a notice to file and you know that you have income or gains or a charge to report, you can file a tax return. 

There are late notification penalties if you fail to notify chargeability.

An individual has an obligation to notify HMRC of chargeability to tax if the following apply:

  • You have made a capital gain.
  • You have employment income that is not taxed under PAYE. 
  • You have dividend income and further tax to pay on that income.
  • You have any other untaxed income or are liable to tax at higher rates. e.g.:
    • Your PAYE code has been wrongly calculated and you have underpaid tax
    • You have unreported taxable employment benefits
    • You have income from self employment or from a partnership
    • You receive untaxed rental income
    • You receive foreign income*
    • You are a non-resident landlord receiving rental income.
    • You are a member of an unauthorised collective investment scheme.**
  • You are liable to the higher income child benefit charge.

* Liability to tax on foreign income may depend on your residence status, domicile, the remittance basis rules and any applicable double tax treaties.

** This typically applies by accident: a group of investors club together to jointly invest in property or other assets.

2. Are sent a notice to file by HMRC

If HMRC send you a notice to file a tax return, you must do so.

If you have received a notice to file do not ignore it, even if you have no income to report. Having received a notice to file, you will receive a late filing penalty if you fail to submit one.

Directors only:

  • HMRC generally set up a self assessment record for a new director once a company is formed: information is provided either via Companies House or subsequently. 
  • If you are a non-resident director of a UK company HMRC will generally request that you file a return every year even if you draw no remuneration.
  • You do not automatically require a PAYE scheme, this is only necessary if you are paying remeration subject to PAYE, or your employer provides employment benefits or pays you expenses of employment.

3. Wish to claim a refund or make a claim for relief.

You may register for self assessment and file a tax return in order to:

  • Claim a relief or allowance that must be made on a return.
  • Claim employment expenses or allowances not received via your employer or PAYE coding notice.
  • Notify your residence status or domicile.

It may be possible in certain circumstances to claim a refund without filing a tax return, e.g. by writing to HMRC to have a PAYE coding adjusted for an employment expense.

As the processes and HMRC’s guidance can change, and it is advised to seek advice. e.g. a non-resident may make a claim for a personal allowance on form R43 and use that form to notify income, including rental income, however elsewhere in its guidance HMRC states that it also requires a tax return and also registration under the non-resident landlord’s scheme.

In December 2018 HMRC amended its guidance to say that where all of a director’s income is taxed at source and there is no further tax to pay, they do not have to register for and file a self-assessment return.

If you would like London Accountants to prepare and file your tax return then simply get in touch with our team, we will be happy to help.