October 24th, 2018

Does a company director need to complete a tax return?

The good news? No – a director whose income consists only of PAYE earnings and dividends chargeable at the ordinary rate or lower is under no obligation to notify HMRC of their chargeability to income tax.

The bad news? The law (Section 7 Taxes Management Act 1970) and HMRC differ on this.  Take a look at HMRC’s guidance below:

 

 

The incorrect guidance that HMRC use can mean tax payers are badly advised by HMRC front line staff – and even fined for late submission of tax returns that they did not need to complete. Even more worryingly HMRC have stuck to their guns when tax payers have appealed and cases have gone before the Courts.

Fortunately, judges do know the law on this matter and have been scathing about HMRC.

“I consider that the material on the GOV.UK website is wrong and should be removed. No one should be expected to make themselves aware of what is not a correct statement of the law” Judge Richard Thomas

Many directors will have other factors – such as taxable dividends or rental properties – that mean they need to complete a return so care needs to be taken.

But, simply being a director of a limited company isn’t enough for you to need to notify HMRC that you need to complete a tax return – whatever HMRC might say.

 

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John manages a wide portfolio of owner managed businesses and oversees the smooth operation of the firm’s payroll department.

After obtaining his degree in mathematics from the University of Liverpool, John joined Jonathan Ford & Co in 2004 and qualified as a chartered accountant four years later. John likes to keep abreast of developments in tax and accounting and is responsible for the mentoring of junior staff.

Outside of work, John enjoys keeping fit and is a Liverpool FC season ticket holder.

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