Reply to: LTD but not required to submit SA/personal tax returns

[jamesbrown]

Maslins has picked up on a technical point, and is right, there is no legislative requirement for a Director to register for self-assessment. The HMRC however do have a 'policy' where all company directors are to file a personal tax return. Its one of those rare cases (not!) where HMRC policy does not reflect the legislation (section 7 & 8 of Taxes Management Act 1970).

Having said that, I agree its good practice that all Directors complete a personal tax return.

Interesting, thanks for the info.

[Acme Thunderer]

Maslins has picked up on a technical point, and is right, there is no legislative requirement for a Director to register for self-assessment. The HMRC however do have a 'policy' where all company directors are to file a personal tax return. Its one of those rare cases (not!) where HMRC policy does not reflect the legislation (section 7 & 8 of Taxes Management Act 1970).

Funnily I had this very discussion with my accountant but on my wife's behalf. She is a director of MyLtd but receives no salary (she does have a 10% shareholding). Our accountant said she didn't need to fill in a SA, but I queried saying the HMRC webite said she did. He said don't worry as the HMRC policy is not backed up by legislation - however if tax was due that is a different matter.

[Greg@CapitalCity]

Not according to HMR&C and they're the ones who tend to get a bit stroppy about that sort of thing

Maslins has picked up on a technical point, and is right, there is no legislative requirement for a Director to register for self-assessment. The HMRC however do have a 'policy' where all company directors are to file a personal tax return. Its one of those rare cases (not!) where HMRC policy does not reflect the legislation (section 7 & 8 of Taxes Management Act 1970).

Having said that, I agree its good practice that all Directors complete a personal tax return.

[Jeremiah@RHJAccountants]

I would always recommend that a contractor who operates through their own limited company should complete a tax return each year.

Most contractor accountants include the director's tax return as part of the normal service so it should not be any great effort to have one submitted on their behalf.

Alan

I would agree with this.

[Maslins]

I'd agree with Alan that there's no harm in doing one.

Re build up of funds, pension scheme would be a common one, occasionally taking extra dividends and accepting the personal tax hit on it, or going through an MVL then taking a break like you suggest.

[bourneagain]

Also the other aspect to my question was if the director only ever withdraws within the upper tax threshold to avoid attrating higher tax and hence having to return a SA, how does he then extract the funds that eventually build up in the business account without attracting additional tax? only way I could think of is liquidating the company. Is that common practice though?

[Nixon Williams]

I would always recommend that a contractor who operates through their own limited company should complete a tax return each year.

Most contractor accountants include the director's tax return as part of the normal service so it should not be any great effort to have one submitted on their behalf.

Alan

[jamesbrown]

Not according to HMR&C and they're the ones who tend to get a bit stroppy about that sort of thing

I thought the only exception was for a director of a NFP (and when no benefits or payments are taken)....and, in all other cases, it is mandatory.

[bourneagain]

Is your situation similar to this question?

http://forums.contractoruk.com/accou...ssessment.html

There is a link to the HMRC website about it at the bottom in which it states....



I wouldn't take any more advice from that source and don't worry about what they do. Worry about what you do, and that should be the right thing.

the thread attached says "You need to fill one in if HMRC ask you or, if they dont, if you have income on which tax has not been paid."

that would explain why this chap doesnt fill one in. HMRC dont ask him and he doesnt have income on which tax is due (he's kept within the div threshold)

also just realised i didnt find the above thread as i used google to search site:forums.contractoruk.com. bad idea, filters out most of the goodies.

[LisaContractorUmbrella]

[QUOTE=Maslins;1673484]Well, yes, though there's more than a tiny number of contractors who either:
- don't earn mega bucks, so taking everything out as divis still leaves them under higher rates, or
- do earn mega bucks, but only extract up to the higher rate tax bracket, saving the rest/putting it in a pension etc.

The number of contractors with fancy stuff like buy to let properties is minimal...though those with student loans if quite high.

Anyway...I was being a little pedantic, but the statement "if you're a director you have to submit a personal tax return" is wrong.[/QUOTE]

Not according to HMR&C and they're the ones who tend to get a bit stroppy about that sort of thing

[Maslins]

Where that might be true we have to be aware of context here and of our audience. How many people asking questions or reading this forum fit in to the catagory in the last paragraph.

Well, yes, though there's more than a tiny number of contractors who either:
- don't earn mega bucks, so taking everything out as divis still leaves them under higher rates, or
- do earn mega bucks, but only extract up to the higher rate tax bracket, saving the rest/putting it in a pension etc.

The number of contractors with fancy stuff like buy to let properties is minimal...though those with student loans if quite high.

Anyway...I was being a little pedantic, but the statement "if you're a director you have to submit a personal tax return" is wrong.

[northernladuk]

I disagree with many of the comments above. Being a director does not in itself mean you need to submit a personal tax return. Yes, I am aware of that HMRC page that seems to suggest otherwise.

Many directors will have to do personal tax returns, as they typically have more complex personal tax affairs than humble employees. Eg many contractors will have dividends taking them into higher rates, or have other funnies requiring disclosure like sub-letting usage of their home to the company.

However, if a director/shareholder has all their income suitably taxed via PAYE/at source, then as far as I'm aware they have no legal requirement to complete a personal tax return.

Where that might be true we have to be aware of context here and of our audience. How many people asking questions or reading this forum fit in to the catagory in the last paragraph.

[Maslins]

I disagree with many of the comments above. Being a director does not in itself mean you need to submit a personal tax return. Yes, I am aware of that HMRC page that seems to suggest otherwise.

Many directors will have to do personal tax returns, as they typically have more complex personal tax affairs than humble employees. Eg many contractors will have dividends taking them into higher rates, or have other funnies requiring disclosure like sub-letting usage of their home to the company.

However, if a director/shareholder has all their income suitably taxed via PAYE/at source, then as far as I'm aware they have no legal requirement to complete a personal tax return.

[Nathan SJD Accountancy]

I wouldn't take any more advice from that source and don't worry about what they do. Worry about what you do, and that should be the right thing.

Couldn't put it any better!

To the OP -->Yep, you need to do an SA as a Director of a Limited Company.

[Lumiere]

Yes, if you are a director you have to do the SA.
Despite that you may find it hard to convince HMRC to give you your UTR number so you can actually submit one.

Having said that it might be that this is one of the grey areas where there is a rule, but accountants think it is OK not to follow it due to unofficial approval from HMRC. E.g. some accountants say it is not necessary to submit P11D if you only had travel expenses reimbursed to you and no BIK. There is a fine for wrongly calculated P11D, but no fine for not submitting one, as I am aware. It is different for SA though as you get a fine for not submitting one if you had to.