Posted by Nick Day on 09 Aug 2017
HMRC Guidance Wrong on Directors Tax Returns
HMRC have long held the view that all directors of limited companies are required to register for Self-Assessment and submit a Self-Assessment Tax Return (SATR) as a result of their directorship. Tax Professionals have argued that there is no legislative basis for HMRC’s view, and a Tax Tribunal has now agreed that HMRC’s view, and their published guidance on directors tax returns, is incorrect under the law.
Tax Innovations opinion has been that the legislation does not require a company director to register for Self-Assessment as a matter of course and that it is only HMRC’s guidance that states this as a requirement. However, if HMRC issue a notice to file a SATR to a director then that director must submit a SATR.
Tax Returns Tribunal Case
In a recent Tax Tribunal case, HMRC had sent a notice to file a SATR to a company director for 2014-15, who failed to submit a return, so penalties were imposed on the taxpayer. The taxpayer appealed on the basis that they had not received the notice to file a return (as it had been sent to the wrong address) and that all their income was paid through the company (subject to PAYE), so there was no legal requirement for them to submit a SATR.
HMRC argued in court that, as a company director, the taxpayer was still required to register for Self-Assessment and submit a SATR, in accordance with their guidance.
The Tribunal found that the taxpayer was under no obligation to follow the HMRC guidance, as it does not have the force of law; nor did the guidance accurately reflect what the law said. Thus, as the notice to file had been sent to the wrong address, the taxpayer had a reasonable excuse for not submitting a SATR and the penalties were overturned.
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