After several recent tribunal cases on the subject, HMRC has 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.
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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a notice to file a return and have no other taxable income to report, they can ask for the notice to file to be withdrawn.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 decides 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?
There are three circumstances in which you should file a UK self-assessment return, where:
- Have capital gains or income to report and you must also notify charge ability.
- 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 must notify HMRC of the charge ability to tax if the following apply:
- Have made a capital gain.
- You have employment income that is not taxed under PAYE.
- 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.:
- The PAYE code has been wrongly calculated and you have underpaid the tax
- You have unreported taxable employment benefits
- You have income from self-employment or a partnership
- Receive untaxed rental income
- Receive foreign income*
- Non-resident landlord receiving rental income.
You are a member of an unauthorized 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 sends 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 sets 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 remuneration 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 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 is also registered 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.
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