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Do Directors Need to Submit a Tax Return?

It has been a controversial issue for years that HMRC has insisted that all company directors file tax returns. This was undoubtedly inconsistent with tax law and has been successfully challenged in recent lawsuits.


By Law, Do Directors have to File a Tax Return?

According to the TMA act 1970, it is not necessary for the directors to file tax returns. A director is only required to register for the self-assessment if an additional tax liability is due.




As a Company's Director, Do You have to File a Tax Return?

The criteria for company directors are the same as for any employee. If your only income is already taxable at source, such as PAYE, or you have small amounts of savings interest or dividends of less than £2,500, you may not need to file a return.

You can quickly check all the criteria in HMRC's updated self-assessment tool. However, pay attention to the first question, which is "Did you work for yourself...?". Always answer “yes” if you are a director, even if you are not the majority shareholder. The remaining questions are simpler and will help you decide if you need to file a tax return.

HMRC Guidance, Do Directors Need to File a Tax Return?

according to the online guidelines of HMRC: "you must file a tax return if you were a director of a company in the most recent tax year".

Therefore, HMRC policy required all directors of the company to file a tax return. Not just those with additional tax debts, as required by law.

Has HMRC Sent You an Application to File a Tax Return?

If you feel you do not need to submit a return, you should contact HMRC to ask them to remove the notification. Otherwise, it's still required and you'll be penalized for failing to file, even if you don't owe any additional tax.

Contact HMRC online if you already have a personal tax gateway account. You can also contact them by phone on 0300 200 3310 or by post. Make sure you have your NI number and Unique Tax Reference (UTR) details available for self-assessment.


What has Changed?

In January 2019, HMRC amended its guidelines to bring them in line with the law.

Do directors have to file a tax return under the new HMRC guidelines? The notice that HMRC now says that you are a director you are not required to file a tax return. This is the case if they are taxed under PAYE and have no additional untaxed income.

HMRC has updated its online tool to help clarify who needs to file a tax return. This tool is not just for Directors. So if you're not sure if you need to file a tax return, use this tool from HMRC.


Possible Dangers

Now that HMRC and the law are online. The question of whether directors need to file a tax return should be an easy one. However, this is not always the case.

A director who has received notice to file a tax return must do so. If the notice is issued incorrectly, the Director can ask HMRC to withdraw the notice. HMRC can always refuse this request and insist that a tax return be completed.


How to File a Self-Assessment Tax Return?

You can register for the online self-assessment, which can take up to 10 days to create an account.

If the January 31 filing deadline is approaching and you don't have an online account, your only option may be to hire a tax professional if you want to avoid a late filing penalty.

So When Should a Director File a Personal Tax Return?

There are really only two reasons a director should file a personal tax return:


● If HMRC has sent you a notice to complete a tax return, you will need to file one. If you've already registered for self-assessment and have a unique 10-digit tax identification number.


● If you have to pay personal taxes to HMRC. This is one to consider carefully and some examples would be if you are a high earner receiving child support or if you are a director receiving dividends from your company.


It's also worth remembering that if you're likely to apply for a mortgage in the future, the mortgage provider will want to review your personal tax returns to verify your income.

While most mortgage providers look at your business earnings, others also want to see your personal income, so you should definitely register with HMRC for a self-assessment.




Conclusion

There are 3 possible scenarios in which Directors Need to Submit a Tax Return :


● Directors who have received a notice to complete a tax return should do so or ask HMRC to remove the notice.


● If a director has additional tax-free income, such as Dividends, they must register for the self-assessment and file a tax return.


● Directors who only receive PAYE income and do not receive additional tax-free income are no longer required to register for self-assessment.




Need Help?

Penalties and fines for errors can be significant. Therefore, it is important to seek professional tax advice if you are unsure of your obligations. Contact us on 07341371345 or email us at info@protaxaccountant.co.uk





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