Do I have to file a tax return? The answer to the question is simple, straightforward and unambiguous. Yes, if HMRC have given you a notice to do so. No, if they haven’t. It’s as simple as that. And the rule applies to individuals, trustees, companies, partnerships, children, adults and non-residents (even Martians, if they count as “persons”) alike. (Actually, there is now one exception. Guess what it is before finding the answer elsewhere on our website: it doesn’t affect the rest of this article.)
So how could any confusion creep in?
Well, it appears that Government guidance on running a limited company includes the advice that: “As a director of a limited company, you must: … register for Self-Assessment and send a personal Self-Assessment tax return every year.”
Based on this, HMRC asserted in the recent Tribunal case of Kadhem v HMRC [2017] UKFTT 0466 (TC) that “as a company director one of the appellant’s responsibilities is to register for self-assessment and send a personal self-assessment tax return each year without prompt or reminder from HMRC” and that HMRC “do not issue reminders to file tax returns and have no obligation to do so.” They thus sought penalties from Mr Kadhem in respect of his alleged delinquency.
Happily, the Tribunal set HMRC straight on this. Absolutely no-one (but no-one: did we make that clear?) has any obligation to file a self-assessment tax return spontaneously, as it were. It is disturbing to think that anyone in HMRC thinks otherwise.
OK then: if you don’t have to file a tax return unless one is demanded, what is your obligation under self-assessment? Essentially it is to “notify chargeability”. That is to say, if you are chargeable to Income Tax or CGT for a tax year and you haven’t received a notice requiring you to file a tax return, you must declare the fact of your chargeability to HMRC, normally within six months of the end of the tax year.
But, crucially, there are exceptions. Broadly, you are absolved from your obligation to notify chargeability if you have no chargeable gains, you aren’t liable to the “high income child benefit charge” and all of your income is either taxed under PAYE (or coded out under PAYE) or is taxed income or dividend income of an amount which doesn’t render you liable to pay further tax. Nary a word about whether you are a company director.
One more interesting point. Although a similar requirement to notify chargeability applies to companies, there is no cognate obligation imposed on partnerships (for the rather obvious reason that a partnership is not itself “chargeable” – it’s the partners who are chargeable). It’s good practice to tell HMRC when a partnership commences, so that HMRC can issue returns at the right time: but don’t let HMRC tell you that a failure to do so carries any penalty.
For more information, please get in touch with your usual contact partner at BKL or use our enquiry form.
In July 2017, this article was published in Tax Journal issue 1361 and is also available on the Tax Journal website and as a pdf download.