LTD but not required to submit SA/personal tax returns

[bourneagain]

Sorry if this has been covered elsewhere, i have searched the forum with “self assessment” “personal return” and similar but have not found anything to answer this.

Moving from umbrella to LTD and while speaking with colleagues about good accountants, found one chap who’s running his own ltd and has never submitted a tax return. He/his accountant believe (or have a found a reason to believe) that he doesn’t need to. My understanding was this must be done just by virtue of being a director of a ltd company, regardless of whether the individual has a tax liability in that year. He seems to be ok and claims other clients have been doing this for years. He wasn’t sure himself how this was possible and wouldnt go into details of his finance but said the accountant had examples of legal cases where this scheme was challenged and successfully defended and that this obligated HMRC to act/find consistently should they challenge any of his clients.

Im guessing he is taking minimum wage, keeping dividends under £32k to avoid income tax on dividends. Then at a later stage liquidating the company and withdrawing the remaining funds. Cant think of another way you can avoid submitting a tax return and take out all the funds from your business account. Regardless of whether or not you owe income tax on your dividends, you must submit the self assessment, yes?

[northernladuk]

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....

Who needs to complete a Self Assessment tax return?
Not everyone needs to complete a tax return. If your tax affairs are straightforward you may already pay all of the tax due on your earnings or pensions through your tax code.

But you may need to complete a tax return if you have more complicated tax affairs, even if you already pay tax through your tax code. There are also certain circumstances in which you will always need to complete a tax return - for example if you're:

self-employed
a company director
a trustee
receiving foreign income

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.

[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.

[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.

[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.

[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]

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.

[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

[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.

[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.