New HMRC guidance for directors’ returns

Until now, HMRC has insisted that all directors must register for self assessment, even if they have no tax to pay. This has now!

HMRC has said that all company directors must register for self assessment, treating this rule as law, but in fact it’s simply advice that can help you to decide whether you need to complete a tax return. As an example, HMRC has traditionally insisted that directors should complete a tax return for the tax year in which they become a director, even if they receive no dividends or income from the company in that year.

Several legal tests have been carried out to determine the position of a “no income” or a “no income other than PAYE” director, and a judge has now said that:

“No one has a statutory obligation to do anything in relation to income tax simply because they are a director of a company which is not a not-for-profit company. Being a director per se does not entitle a person to dividends … If dividends from the company of which a person is a director fall within the higher rate band or above [for 2015/16], then there was a liability to notify, but not because of being a director.”

So HMRC has finally changed its position and the new advice is that a director is NOT required to file a Self Assessment Return if he or she is taxed under PAYE and has no additional tax to pay on other income such as dividends.

You must still file a tax return if HMRC has issued a notice to do so.  You may be able to ask HMRC to have the notice to file withdrawn, but it may decline your request. We’ll advise you on this if the case arises, as you could be issued a “section 8 notice” which means they won’t take it back and you must still submit your tax return or face a fine if it has been issued and not withdrawn, and then your payment ends up being late.

There’s some government guidance here to help you see whether you need to complete a Self Assessment Tax Return. It includes a message saying that you don’t need to if you’re a director with an income below £50,000 and no other taxable income. Of course, it’s much simpler for you to pick up the phone and ask us – we’re always on hand to answer your tax-related queries and would be delighted to sit down over a cup of coffee and run through things. Call us on 020 8530 0720 or email