For a lot of a yr, I’ve argued the purpose Director is just not obligated by regulation to file a self-evaluation tax return.
I’ve argued this level with accountants, on boards, in blogs and with HMRC.
Properly that’s easy … as a result of that’s the regulation.
You solely have to finish a tax return when you meet sure circumstances.
Being a Director is just not a type of circumstance.
First Tier Tax Tribunal
And it appears that evidently, the “large weapons” on the First Tier Tax Tribunal agree.
The case of Mohammed Salem Kadhem and The Commissioners for Her Majesty’s Income and Customs examined the case of Mr Kadhem being fined for not submitting a self-evaluation.
Mr Kadhem efficiently argued that the fines weren’t legitimate as he didn’t must file a self-evaluation for the yr in query.
The Tribunal agreed with him.
HMRC bought it mistaken
What this implies is that HMRC bought it mistaken!
What’s worse are the levels and layers of enchantment and criticism that the matter would have gone by way of earlier than it bought to this First Tier Tax Tribunal – a great deal of them!
Did nobody at HMRC examine the regulation? Superb!
It appears that evidently not solely did HMRC fail to examine the regulation earlier than they refused Mr Kadhem’s enchantment however HMRC have the smug conceitedness to take a regulation abiding taxpayer by way of the stress, fear and expense of a Tax Tribunal.
And at what price? This stuff doesn’t come low cost!
HMRC by their very own admission acknowledged within the Tribunal that “the enchantment is just not involved with specialist or obscure areas of tax regulation. It’s involved with bizarre day-after-day obligations …”
HMRC aren’t a match for function
So HMRC admit that they can’t get the bizarre and on regular basis obligations proper!
How on earth can they be tasked with the accountability of working the system or amassing taxes within the UK?
In the latest letter now we have acquired kind HMRC they are saying to a shopper of ours that “As you’re a Firm Director you’ll have been effectively conscious that you’re required by regulation to file your tax returns.”
My response to them … “As you ought to be conscious the steerage that you just give is completely mistaken! Go learn the tax legal guidelines earlier than you write such nonsense”.
HMRC’s incorrect steerage is echoed on this internet web page https://www.gov.uk/running-a-limited-company (though it might have been modified by the point you have a look at it which says “As a director of a restricted firm, you have to register for Self Evaluation and ship a private Self Evaluation tax return yearly”.
GOV.uk is mistaken
Once more I’ve argued on many an event that the steerage given on GOV.uk is just not at all times proper. The Tribunal thought about this and mentioned that this steerage doesn’t have the pressure of the regulation and it doesn’t precisely mirror what the legal guidelines say.
HMRC needs to be completely embarrassed about this! The very fundamental issues that they’re tasked to do and they don’t even know the tax legal guidelines. Or is it that HMRC has a blatant disregard for tax regulation?
It has to be one of many two.
The issue is that we, as accountants, need to cope with this nonsense day in and time out. Over the past couple of years, HMRC has gotten worse. A lot worse.
Aggressive Penalty Farming
While it might be a sweeping generalisation they have no idea what they’re doing more often than not. There positively appears to be a tradition of aggressive penalty farming being employed …. going after the “small fish” while the “large fish” get away with tax homicide.
The most effective recommendation that I can provide to anybody is to not assume that HMRC is proper when the brown envelope falls on the doormat. They do get it mistaken. Rather a lot in truth.
All the time examine their calculation, fines and penalties. Examine that they’ve utilized regulation appropriately.
They do generally tend to imagine that everybody is attempting to buck the system; in fact, there are some who, however, in my expertise, the bulk are sincere taxpayers. HMRC would do effectively to keep in mind that and to revise the tax legal guidelines earlier than making full idiots of themselves at the entrance of a Tax Tribunal.
Whoever at HMRC took the choice to carry the case in opposition to Mr Kadhem needs to be given the sack! Or at the very least return to high school and be taught the Tax Legal guidelines.