New questions for Self Assessment tax return

The change affects taxpayers who begin or end self-employment, and directors of close companies. Broadly speaking, a close company is a company controlled by its directors, or by five or fewer ‘participators’, such as shareholders. Most family or private companies are likely to fall within this category.

From April 2025, where a self-employed person begins or ceases trading during the tax year, it will be mandatory to report this, with relevant dates, on the tax return. Previously this was a voluntary requirement. This additional requirement will impact personal tax returns, partnership returns and trustees’ returns.

For company directors, it becomes mandatory, rather than voluntary, to disclose close company directorships. Directors will also have to state the name and registered number of the close company; the value of dividends received from the close company for the year, declaring this separately from other UK dividends; and the percentage shareholding in that company for the year. If shareholding changes during the year, it’s the figure for the highest percentage shareholding that is needed.

Tax compliance: much more than common sense

Keeping up to date with tax isn’t always as simple as it seems, as one taxpayer, Mr Hammant, recently found to his cost.

The cost was in fact £1,200, and the expensive bill arose because Mr Hammant thought he had filed his Self Assessment tax return online, and didn’t discover that it hadn’t been submitted correctly until over a year later.

Mr Hammant had signed up for paperless communication from HMRC, and not realising that anything had gone wrong with the tax return filing, hadn’t seen the need to check his personal tax account for some time. He also mistakenly believed that ‘important’ communications from HMRC would be sent in the post. This meant that penalty notices, reminders and statements were clocking up in his personal tax account, unnoticed. And in the meanwhile, £1,200 accrued in penalties - despite no tax being due on the return itself.

When Mr Hammant finally realised what had happened, he acted at once. The tax return was filed, and he made an appeal against the penalties. But the appeal was not allowed, and the penalties stuck.

It comes as a shock to many people to realise just how inflexible the tax system can be. HMRC did not give up the penalties in this case: and indeed, it has only limited discretion to do so. The First-tier Tax Tribunal weighed up the law, but it, too, has only a certain amount of wriggle room.

The best plan is always to get it right first time: to be on top of the deadlines, and to know how to meet your tax responsibilities. That is what we are here to help with. Please don’t hesitate to contact us at any time.