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Self-employed Tax Returns

  • Posted by:
  • Admin
  • Tags:
  • Tax Returns, HMRC
  • Posted date:
  • 27-12-2018

Self-employed Tax Returns

The filing of self-assessment tax return is a requirement by the law. As the financial season comes to an end, it is time to consider the obligations of a company director when it comes to the filing a self-assessment tax return. There are times when a return notice is issued. In this case, it becomes a requirement for the director first to file a tax return with HMRC.

In cases where there is a liability to be taxed, for a particular year of assessment, it is necessary for the director and any other person in this matter to let the HMRC know about it. This should be done by the fifth day of October following the end of the year of assessment. If one fails to meet this requirement, they become accountable for penalties according to section 7 of the Tax Management Act 1970. 

In cases where a director has not been issued with the self-assessment tax return, and no liability is involved, there is an HMRC online guidance that will help. This guidance states that you need to send a return if you were a company director in the last tax year. However, this does not apply if a person is a director to a non-profit organisation, for example, a charity. It also does not apply if the director did not get any pay or benefits that are given by companies, for example, a company car.

tax return form on office desk

The Law

There are some areas of this process that is unclear to most people, and that's what the law says when it comes to filing of company director self-assessment tax return. The law states that if an individual has been issued with a notice to file a tax, then they must do so and submit an SA return. This is under section 8(1) of the Tax Management Act 1970.

The law goes ahead to state that if an individual has not been issued with a notice to file the return under tax management act 1970, SB, they must report to the HMRC. This also applies in cases where an individual had received a notice, and it was withdrawn. 

If an individual has income or gains chargeable to tax for the year (TMA 1970S (1)), the tax report must be made generally by the fifth day of October after tax year end. The law states that the director who has no income at all is not required to report to HMRC, neither is he required to register for self-assessment. This also applies to the director whose income is taxed under PAYE.

Does A Director Have To File a Tax Return If It Is Nil?

A personal tax return is meant to notify the HMRC the obligation of an individual to pay tax. This is a requirement of the law if there is a tax liability to pay. If HMRC offers a notice to be completed, the director must file the self-assessment tax return. For the years that the director serves in the company, HMRC expects them to file a tax return even in cases where it is nil. 

However, most directors with nothing to declare tend to argue that this is a waste of time to pay an accountant to file a nil return. There is no actual legal requirement of filing a tax return where it is nil. This, therefore, can make it a lot of administration work to be filing a nil return to most of the directors. Some accountants may offer this service for free for some benefit to them. This can get somehow complicated. 

It is important to note that the EM4551 from HMRC’s inquiry manual confirms that there is no obligation for an individual to notify HMRC where there is no liability for tax. It also states that there is a requirement to notify charge-ability where there is no liability to IT or CGT or where sufficient tax has been deducted to meet the net liability of the year.

accountant calculating tax