For many a year I have argued the point that a Director is not obligated by law to file a self assessment tax return.
I’ve argued this point with accountants, on forums, in blogs and with HMRC.
Well that’s simple … because that is the law.
You only have to complete a tax return if you meet certain conditions.
Being a Director is not one of those conditions.
First Tier Tax Tribunal
And it seems that the “big guns” at the First Tier Tax Tribunal agree.
The case of Mohammed Salem Kadhem and The Commissioners for Her Majesty’s Revenue and Customs examined the case of Mr Kadhem being fined for not filing a self assessment.
Mr Kadhem successfully argued that the fines were not valid as he didn’t need to file a self assessment for the year in question.
The Tribunal agreed with him.
HMRC got it wrong
What this means is that HMRC got it wrong!
What’s worse are the stages and layers of appeal and complaint that the matter would have gone through before it got to this First Tier Tax Tribunal – loads of them!
Did no one at HMRC check the law? Amazing!
It seems that not only did HMRC fail to check the law before they refused Mr Kadhem’s appeal but HMRC have the smug arrogance to take a law abiding tax payer through the stress, worry and expense of a Tax Tribunal.
And at what cost? These things do not come cheap!
HMRC by their own admission stated in the Tribunal that “the appeal is not concerned with specialist or obscure areas of tax law. It is concerned with ordinary every day responsibilities …”
HMRC are not fit for purpose
So HMRC admit that they cannot get the ordinary and everyday responsibilities right!
How on earth can they be tasked with the responsibility of operating the system or collecting taxes in the UK?
In a recent letter we have received from HMRC they say to a client of ours that “As you are a Company Director you will have been well aware that you are required by law to file your tax returns.”
My response to them … “As you should be aware the guidance that you give is entirely wrong! Go read the tax laws before you write such nonsense”.
HMRC’s incorrect guidance is echoed on this web page https://www.gov.uk/running-a-limited-company (although it may have changed by the time you look at it which says “As a director of a limited company, you must register for Self Assessment and send a personal Self Assessment tax return every year”.
GOV.uk is wrong
Again I have argued on many an occasion that the guidance given on GOV.uk is not always right. The Tribunal considered this and said that this guidance does not have the force of the law and it does not accurately reflect what the laws says.
HMRC should be thoroughly embarrassed about this! The very basic of things that they are tasked to do and they do not even know the tax laws. Or is it that HMRC have a blatant disregard for tax law?
It must be one of the two.
The problem is that we, as accountants, have to deal with this nonsense day in day out. Over the last couple of years HMRC have got worse. Much worse.
Aggressive Penalty Farming
Whilst it may be a sweeping generalisation they do not know what they are doing most of the time. There definitely seems to be a culture of aggressive penalty farming being employed …. going after the “small fish” whilst the “big fish” get away with tax murder.
The best advice that I can give to anyone is not to assume that HMRC are right when the brown envelope falls on the doormat. They do get it wrong. Quite a lot in fact.
Always check their calculation, fines and penalties. Check that they have applied to law correctly.
They do have a tendency to assume that everyone is trying to buck the system; of course there are some who are but, in my experience, the majority are honest tax payers. HMRC would do well to remember that and to revise the tax laws before making complete idiots of themselves in front of a Tax Tribunal.
Whoever at HMRC took the decision to bring the case against Mr Kadhem should be given the sack! Or at least go back to school and learn the Tax Laws.