Reply to: Quandary - Wife's Tax Return

[TheCyclingProgrammer]

Presumably for tax year 2016/2017 this argument is irrelevant? Income shifting and the new dividend tax will mean there is tax to pay and therefore by law an SA to complete for an otherwise non-working spouse with a 50/50 shareholding split up to the basic threshold?

With a 50/50 split you are probably right, but spouses with lower share holdings may still not need a return (eg with a 75/25 split as my wife and I have its possible for her dividends to still fall within the personal allowance).

Generally though, the dividend tax changes will pull people into the self assessment system that didn't need to be before.

[Jessica@WhiteFieldTax]

Presumably for tax year 2016/2017 this argument is irrelevant? Income shifting and the new dividend tax will mean there is tax to pay and therefore by law an SA to complete for an otherwise non-working spouse with a 50/50 shareholding split up to the basic threshold?

Agree in principle.

In practice HMRC may try and manage this for some people outside of Self Assessment and via tax codes. To be honest that creates so much toing and froing that an SAR is infinitely easier.

[MickeyP]

My accountant advised the same thing based on HMRC guidance but I'm also now of the view that there is only a legal requirement to file a SAR if you owe any tax.

The way I see it, HMRCs guidance is based on the idea that most people who meet certain conditions will have have tax to owe so they are erring on the side of caution.

As far as I can tell, you can't be fined for not submitting a SAR if you don't owe any tax UNLESS HMRC have explicitly sent you a letter asking you to file one (in which case you can get a £100 penalty for late submission even if you don't owe tax). No tax due and no request to file = no penalty.

Too late for me, my partner is signed up for SA and I did hers a few months ago.

I'm guessing that after a year or two of nil returns, HMRC will turn around and ask her to stop sending them, just like the OP.

Remember, HMRC don't want the system being clogged up with pointless tax returns by people who owe no tax. It's a waste of time and money. I'm sure I read somewhere recently that there is going to be an increased effort to take people out of the SA system who don't need to be there.

Presumably for tax year 2016/2017 this argument is irrelevant? Income shifting and the new dividend tax will mean there is tax to pay and therefore by law an SA to complete for an otherwise non-working spouse with a 50/50 shareholding split up to the basic threshold?

[Jessica@WhiteFieldTax]

+1 on Martin's views, same policy adopted here.

TBH the "cost" of an accountant doing a SA return is negligible. The cost is in getting the information together to review the liability in the first place, which comes under "good practice" (AKA keeping clients out of trouble)

[Martin at NixonWilliams]

Just to end this thread, and as my accountant (NW) confused things again by advising that my wife must do a tax return because she's a company director, my wife phoned HMRC to ask the question.

HMRC confirmed that she did NOT need to do a return.

Our advice is not intended to confuse matters.

We are aware of the fact there is no specific legal requirement for a director to file a return providing they have no untaxed income etc., we follow HMRC's guidance as this is the safest approach and prevents our clients from experiencing problems with HMRC.

One reason we do this is because in the majority of cases HMRC have issued a notice to file or claim to have done. It is easy to overlook the letter or to forget to update your address with HMRC, this can be an expensive mistake to make.

In addition, some clients wish to complete a return just to satisfy HMRC that there is no tax due. The regular posters on here are very much aware of their income that is taxable, what is taxed at source and the important thresholds etc. however many clients do not have the same level of awareness and whilst no additional tax may be due in one year, in another year there may well be. Filing a return each year removes this problem.

I am pleased you have resolved this with HMRC. If you haven't already, be sure to obtain a call reference. We have had this conversation with HMRC many times and the answer to the question you asked is more commonly answered yes than no!

I hope this explains our position. If you have any questions or comments please contact me directly at martin.brennan(at)nixonwilliams.com.

Martin

[Old Greg]

My friend's wife will be pleased. My friend had decided his accountant was wrong.

[ASB]

[TE=Old Greg;1869003]A friend's wife has always assumed that where she is receiving >10k in divis and no tax is due (she is not a director) then there is no legal obligation to submit an SAR. Is this correct. If not my friend is in the do-do.[/QUOTE]

Og, in my view tcp summed it up.

Hmrc say give us one you must.
hmrc dont then you must if you owe. Make your own interpretation kf s7 and s8.

in terms of what you wrote she is fine. But if worried ask. SORRY TO SHOUT BUT THE RULES ARE THEY ASK. IF THEY DONT ASK THE TAX DOESNT GO AWAY.

[ASB]

[TE=Old Greg;1869003]A friend's wife has always assumed that where she is receiving >10k in divis and no tax is due (she is not a director) then there is no legal obligation to submit an SAR. Is this correct. If not my friend is in the do-do.[/QUOTE]

Og, in my view tcp summed it up.

Hmrc say give us one you must.
hmrc dont then you must if you owe. Make your own interpretation kf s7 and s8.

in terms of what you wrote she is fine. But if worried ask. SORRY TO SHOUT BUT THE RULES ARE THEY ASK. IF THEY DONT ASK THE TAX DOESNT GO AWAY.

[TheCyclingProgrammer]

A friend's wife has always assumed that where she is receiving >10k in divis and no tax is due (she is not a director) then there is no legal obligation to submit an SAR. Is this correct. If not my friend is in the do-do.

My accountant advised the same thing based on HMRC guidance but I'm also now of the view that there is only a legal requirement to file a SAR if you owe any tax.

The way I see it, HMRCs guidance is based on the idea that most people who meet certain conditions will have have tax to owe so they are erring on the side of caution.

As far as I can tell, you can't be fined for not submitting a SAR if you don't owe any tax UNLESS HMRC have explicitly sent you a letter asking you to file one (in which case you can get a £100 penalty for late submission even if you don't owe tax). No tax due and no request to file = no penalty.

Too late for me, my partner is signed up for SA and I did hers a few months ago.

I'm guessing that after a year or two of nil returns, HMRC will turn around and ask her to stop sending them, just like the OP.

Remember, HMRC don't want the system being clogged up with pointless tax returns by people who owe no tax. It's a waste of time and money. I'm sure I read somewhere recently that there is going to be an increased effort to take people out of the SA system who don't need to be there.

[Old Greg]

Kess, you will find a chunk of stuff on accounting web as to the actual requirements set down by law.

I am interpreting your question as "does my wife have to fill in satr because she is a director". The answer to that is no.

But be aware there could be other reasons. E.g. more than 10k in dividends. You can find hmrc view on their website. It doesnt make them enshrined in law though.

A friend's wife has always assumed that where she is receiving >10k in divis and no tax is due (she is not a director) then there is no legal obligation to submit an SAR. Is this correct. If not my friend is in the do-do.

[Kess]

Just to end this thread, and as my accountant (NW) confused things again by advising that my wife must do a tax return because she's a company director, my wife phoned HMRC to ask the question.

HMRC confirmed that she did NOT need to do a return.

[Kess]

xoggoth - Many thanks for the detailed clarification. I must admit I had naively assumed the information on the HMRC site was definitive.

[xoggoth]

Yes it does but it isn't legally correct. As someone has said this has been covered on accounting web. I kept notes, here:

Q
Posted by andyrhb PM | on Wed, 28/09/2011 - 17:02
We have several director/shareholder companies where the directors take a small salary and dividends (and have no other income) which leaves them well below the higher rate tax band and therefore not liable to personal tax and they have not been requested to complete a self assessment tax return by HMRC - so a return isn't submitted.
My concern now however under the new self assesment penalty regime is that penalties can be imposed even where there is no loss of tax - so is there a danger that HMRC will fine directors for not informing them that they are directors?
A
It is policy not law
Despite the opinion of the HMRC staff their guidance is only opinion and sometimes their own policy. The legislation says that if you are asked to complete a return then you must do so.
A
No - directors are not legally required to submit tax returns
This has come up so often.
Tax returns for directors | AccountingWEB

A
From Euan's link, if you scroll up to the previous paragraph on HMRC site it advises that you *must* complete an SA return if you are a company director (subject to some specified exceptions). WRONG. S.7 TMA makes no reference to officers of companies as a criterion for notification. (It goes without saying, I think, that you must complete one if served with a notice to do so, whatever the income to be declared and whatever the tax consequences).
It beggars belief that so many accountants who should no better are willing to take on trust the guidance issued by HMRC. This comes up so regularly on AWeb.
A
The HMRC guidance HM Revenue & Customs: Do you need to complete a tax return?
which you are quoting is mostly wrong and thoroughly misleading to members of the public and apparently to some accountants.
Self-assessment | AccountingWEB

[Kess]

I am interpreting your question as "does my wife have to fill in satr because she is a director". The answer to that is no.

Exactly. All HMRC's Do you need to complete a tax return page says is that you must complete a return if you're "a company director (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)". Hence my concern and confusion.

[ASB]

Kess, you will find a chunk of stuff on accounting web as to the actual requirements set down by law.

I am interpreting your question as "does my wife have to fill in satr because she is a director". The answer to that is no.

But be aware there could be other reasons. E.g. more than 10k in dividends. You can find hmrc view on their website. It doesnt make them enshrined in law though.