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It is mandatory for a company director to file a tax return with HMRC, if a return has been issued.

It is also mandatory for a director (or anybody for that matter) to notify HMRC if they have a liability to tax for a particular year of assessment, by 5 October following the end of the year of assessment, otherwise they become liable to penalties, in accordance with Taxes Management Act 1970 (TMA) s7.

But what about if a Self Assessment tax return has not been issued to a director and he does not have a tax liability?

HMRC’s on-line guidance “Do you need to complete a tax return?” states that:

"You must complete a return if you're any of the following:

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)………..”

We have been made aware of several instances of HMRC staff insisting that a tax return is required for a director even though a return has not been issued and there is no further tax liability for the year, in accordance with the above guidance.

BUT is this guidance consistent with the legislation?

There is no specific requirement in TMA 1970 for a director to register for self assessment if there is no further tax liability for the year and buried within HMRC’s Manuals at EM4551, there is some further guidance:
“There is no requirement to notify chargeability where there is no liability to Income Tax or Capital Gains Tax or where sufficient tax has been deducted at source to meet the net liability for the year.”
There is no exception to this for directors. 

Therefore, if a director of a company has no further tax liability for a tax year AND no self assessment tax return has been issued by HMRC, then there is NO requirement for the director to notify chargeability OR file a tax return with HMRC for the year in question.

If HMRC try to insist that a return is due in these circumstances, you should refer them to TMA 1970, s7 and their own manual at reference EM4551.

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