Guidance or legislation?

Source: Tribunal | | 06/07/2017

A recent First Tier Tribunal case examined whether a company director had an obligation to submit a Self Assessment tax return without receiving a notice to file. HMRC's case relied on their guidance, which states: 'As a director of a limited company, you must register for Self Assessment and send a personal Self Assessment tax return every year.'

The taxpayer, who was appealing against penalties totalling £1,300 relating to his 2015 Self Assessment return, argued that there was nothing in the legislation to require him to file a return simply because he happened to be a company director.  He also contested that he had never received a notice to file a 2015 tax return and that, had he done so, he would have filed a return immediately, and that, as he had no liability that tax year, it would have been very easy and straight forward for him to do so.

Thankfully the Tribunal found in the taxpayer's favour!  They agreed that HMRC's guidance does not have the force of law and that consequently the taxpayer was under no obligation to follow it. The Tribunal went further, saying that the guidance does not accurately reflect what the law says.  The appeal against the penalties was allowed in full.

It is unlikely that this case will change HMRC’s position in respect of them issuing a return to the vast majority of directors of limited companies and requiring them to file a return annually, but the case highlighted the very significant discrepancy between HMRC's guidance on this matter and the underlying legislation.

We are quite happy that this is a result for common sense and quite relieved on behalf of those directors for whom we act, who aren't required to complete a return, that they will not be brought within the tax return net any time soon.

 

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