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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15713
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Can I ask about tax disclosure question?

Customer Question

Hi, Can I ask about tax disclosure question?
Submitted: 3 months ago.
Category: UK Tax
Expert:  Tony Tax replied 3 months ago.

What is your question?

Customer: replied 3 months ago.
I set up a limited Company in 2010. I am the only director. Through the company I did a consultancy work for an IT company and earned 5710 in the financial year 2010-2011. Since then, I have no further earning. I submitted for the company corporation tax return myself every year since 2010 since the company is more or less dormant. Due to the fact that the amount was below the personal allowance, I did not submit a personal tax return. Am I considered as self-employed and should have submitted the tax return? If yes, what is the worst case penalty for failing to declare self-employed status and submit the tax return?
Many Thanks.
Customer: replied 3 months ago.
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Customer: replied 3 months ago.
Sorry, pressed call me button by accident. Could you kindly answer through text?
Expert:  Tony Tax replied 3 months ago.

I can answer this without the need for a phone call.

Customer: replied 3 months ago.
Many Thanks.
Expert:  Tony Tax replied 3 months ago.

As a director, you should strictly complete an annual self-assessment tax return. You should have registered for self-assessment when you became a company director. However, if you register now, that may trigger the issue of tax returns from 2010/11 to date and late filing penalties of up to £1,600 per tax year, though if the company is dormant and you've drawn no income, an appeal against such penalties would have a high chance of success in the current climate. I know of many directors who are basic rate taxpayers and who don't complete annual tax returns. They may need to from the end of the current tax year, however, due to the new dividend tax on basic rate taxpayers. You are not self-employed. You might also consider closing the company if you don't envisage using it in future.

I hope this helps but let me know if you have any further questions.

Customer: replied 3 months ago.
Should I register now and should I just closed the company?
Expert:  Tony Tax replied 3 months ago.

If it were me, I'd register but I cannot tell you what to do as that is something you will need to decide for yourself. If I wasn't going to use the company again, I'd close it.

Customer: replied 3 months ago.
Many Thanks. I understand. So the registration is for self-assessment as a director and not self-employed? Is that a form for this registration or shall I write a letter. Also should I just register and wait for them to ask questions? Or shall I disclosure the full history in order to minimize the possible penalties?The company only traded once in 2010 and has not traded since and the fact that the income is below my personal allowance, would it make it a stronger case to minimize the penalties received. With regard to the penalties, does HMRC use a "by the book" approach or do they use a case-by-case approach?
Customer: replied 3 months ago.
Also I have been topping up the class 3 national insurance for the last few years. After the registration as a director of the company, can I pay different class of national insurance via the company? How do they calculate how much I have to pay if the company is not making any money?
Customer: replied 3 months ago.
Or rather I have been employed by the company but it didn't pay me any income, do I get NI credit for it?
Expert:  Tony Tax replied 3 months ago.

You can register for self-assessment using a form SA1. It might help to explain that appart form 2010/111, you have had no income form the company as it has been dormant. HMRC now use a case by case approach. I've appealed many £1,600 penalties with success, especially if no tax is due. Class 3 NIC is voluntary and was originally introduced to allow non-working housewives to build up state pension entitlement. You only pay Class 1 employee and employer NIC if you earn over £156 per week. You won't get credit for state pension unless you earn over £112 per week as an employee or director.

Customer: replied 3 months ago.
Many Thanks. If I need your help in appealing the possible penalties, how do we go about this?
Guess Class 3 applies to me since I am a house husband. I've been supported by my wife's income. On that fact, shall I mention to the HMRC that I have been supported by my wife when I filled in the SA1 so that they understand how I survive without any income? I would still like to keep the company for possible opportunities. Do you provide professional services for the annual returns for the company (corporation tax) and my self assessment?
Expert:  Tony Tax replied 3 months ago.

It would be prudent to explain how you have lived since 2010/11, ie as a house husband.

If penalties are issued, then you can appeal against them using the form 370 which you can find a link to here. The form is very easy to complete.

I am not allowed to take on private work through this site I'm afraid.

Customer: replied 3 months ago.
Many Thanks, ***** ***** but can you recommend other qualified professionals/sites. Regarding Class 1 NIC, if I don't earn over £156 per week and don't pay NIC after registering my self-assessment, do I still need to top up my NIC via Class 3 contribution if I want to get my state pension? I paid NIC (don't know what class?) from 1988 all the way to 2009 when I was fully employed. By the way, how many more years do I need to contribute before my state pension is secured (the law as it stands)?
Expert:  Tony Tax replied 3 months ago.

I'm not allowed to recommend anybody either. Google "tax accountants" in your area.

See 4 here. You cannot pay more than the sums shown.

You can get an instant state pension forecast here. You will probably need to use the verify service.

Expert:  Tony Tax replied 3 months ago.

To get the maximum basic state pension, you need 35 years of contributions or deemed contributions if your PAYE earnings are below the threshold at which you pay Class 1 NIC but above the threshold below which you get no state pension credits.

Customer: replied 3 months ago.
With regard to the self-assessment registration and disclosure, shall I use an apologetic tune like " it is my fault that I assume no tax return is required if I earn below the personal allowance level"? Or shall I just be factual so as not to incriminate myself?
Expert:  Tony Tax replied 3 months ago.

There's no harm in giving your reasoning for not completing a tax return.

Customer: replied 3 months ago.
Many Thanks. Can I keep this dialog open in case of follow ups on this subject? If I wanted to ask you question again on other subjects, do I just follow the "request me again" or use other link?
Expert:  Tony Tax replied 3 months ago.

You can keep this question open as long as you like. If you want to ask a question on a different topic, then you can start a new one and ask for me if you want me to answer it.

Customer: replied 3 months ago.
You said: "... or deemed contributions if your PAYE earnings are below the threshold at which you pay Class 1 NIC but above the threshold below which you get no state pension credits." That means I need to earn more than £112 per week but not over £156 per week in order not be counted as "NI paid" hence no need to pay into Class 3 NIC? i.e. I can ask my wife to pay me £156 per week to help with her business in order to get the NI credit(s). I take it that NI credit means it allows you to not to pay NI but still count toward your NI Contribution?
Customer: replied 3 months ago.
Correction: "... in order not to be counted" should be ".... in order to be counted". Sorry.
Expert:  Tony Tax replied 3 months ago.

If you are paying Class 1, you don't pay Class 3, unless you want to fill in gaps in your contribution record. If you earn no more than £112 per week, you won't pay any Class 1 employee NIC and won't get any credit for state pension. If you earn over £155 per week, you will pay Class 1 employee NIC on the excess. If you earn between the two thresholds, you won't pay any Class 1 employee NIC but you will get credits towards your state pension. Read about Class 3 NIC here. I suggest you write to HMRC and get them to tell you what you can do to fill in any gaps.

If you have children and are claiming child benefit, you'll get credit towards state pension. Look here for more information.

Expert:  Tony Tax replied 3 months ago.

I have to go out for a while but will be back a bit later to answer any follow up questions that you may have.

Customer: replied 3 months ago.
Thank you for the kind clarification. I wonder in my case of failure to register self assessment as a company director since 2010 would incur, in theory, a maximum penalty of £1,600 x 5 = £8,000? I am just preparing for the worst case scenario. Also, does our Q&A session visible to the public on the web?
Many Thanks.
Expert:  Tony Tax replied 3 months ago.

You'd have to ask just answer if this is visible on the internet. In any event, it is anonymous.

I cannot say whether you you will be asked to complete tax returns for the 2010/11 up to date let alone whether HMRC will issue penalties. Given that you clearly owe no tax, I'd be surprised if they did. I'd also be surprised if appeals weren't successful.

Customer: replied 3 months ago.
Many Thanks. I've done further research on the self assessment for company director. The subject seems to be very divisive among the professionals. For example: http://www.accountingweb.co.uk/any-answers/should-a-director-register-for-self-assessment. The debate is all around the interpretation of TMA 1970. Some say company directors don't need to register if there is no balance of tax payable. Does that apply to me? I don't want to incriminate myself unnecessarily.
Expert:  Tony Tax replied 3 months ago.

You are right that there is some argument. However, if you look here and fill in the boxes, it will tell you that you need to register. I know people who wouldn't bother registrering.

Customer: replied 3 months ago.
Are the possible penalties of up £1,600 for failure to submit return in time or failure to register for SA as a company director even there is no balance of tax payable? Still want to prepare for the worst case situation. Many Thanks.
Expert:  Tony Tax replied 3 months ago.

There can be as they are not tax related.

Expert:  Tony Tax replied 3 months ago.

I'm just following up to find out if my answer helped or if you have any further questions.

Customer: replied 3 months ago.
Is this £1600 per year?
Expert:  Tony Tax replied 3 months ago.

Yes it is, for the 2011 tax return onwards.

Customer: replied 3 months ago.
Many Thanks. I was filling in the SA and checking my tax records and just realized that I did submit SA before but for my previous employment till 2005 for a few years. HMRC then told me that they did not need me to submit further SAs. Also I have been submitting return for corporation tax (negative profit due to recuring costs) for my company every year since 2011. I have a UTR already. Does it mean I don't need to register again for a new UTR? Can I just add SA in my account on Government Gateway for submitting the corporation tax for my company? I remember I contacted HMRC in 2012 to declare my company dormant so as not to submit the corporation tax returns (CTRs) but they said I still needed to submit the CTR even the company was not trading because the company traded in the first year.
Expert:  Tony Tax replied 3 months ago.

If you have a UTR, you don't need to register again.

Your self-assessment is separate from corporation tax. I don't see any need to add your SA account to the CT account on the government gateway.

Customer: replied 3 months ago.
Within my Gov Gateway account, there are many services available. They include CT and SA. Guess I just need to add SA to my Gov Gatway and see how it goes.
Customer: replied 3 months ago.
It is called Self Assessment (SA) -Service enrolment in my Government Gateway account.
The reason I want to add the SA service is my last year's income is below my personal allowance limit but above the minimum level for NI credit so it may be worth submitting a return and pay Class1 rather than Class 3 NI.
Expert:  Tony Tax replied 3 months ago.

It won't cause any problems. I guess it will add it to the list of available services when you login to the main HMRC site. I've always had all the services I need from when I first registered.

Expert:  Tony Tax replied 3 months ago.

Hi.

I'm just following up to find out if my answer helped or if you have any further questions.

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