According to HMRC’s published guidance (which you can see here), all company directors need to file a personal tax return.
However, the view of HMRC that all company directors need to file a personal tax return is not strictly correct and this point was tested in a recent tax case – Mohammed SalemKadhem v HMRC (see here).
The director (Mr Kadhem) appealed against penalties totalling £1,300 asserting that he was unaware that he had any obligations to file a personal tax return.
You can see here how easily penalties can stack up if you don’t file your tax return on time.
The facts of the case were as follows:
Mr Kadhem initially appealed against the penalties on the basis that he had a reasonable excuse for late filing. He pointed out that he had not received a notice to file a tax return and that he filed a return as soon as he realised that penalties were accruing.
HMRC denied his appeal arguing that because he was a director it was necessary for him to register for Self-Assessment and file a return, without any prompt or encouragement from HMRC.
Mr Kadhem appealed to the Tax Tribual who agreed that he had reasonable excuse for late filling for the following reasons:
So when does a director need to file a personal tax return?
There are really only two reasons why a director needs to file a personal tax return:
It’s also worth considering that if you are likely to be applying for a mortgage in the future, the mortgage provider may want to see your personal tax returns to verify your income.
Whilst the majority of mortgage providers will look at your company’s profits, equally others will want to see your personal income – so you may want to consider be registering with HMRC for Self-Assessment in any event.
And if you’d like to know how we can help you with all of this, or with anything else, feel free to email us at firstname.lastname@example.org