Penalty for late tax return

The issue is not whether a return should have been made or not. It should have been submitted. There is no question about that. The question now is what income tax liability should be used to calculate the penalty. The legislation doesn't specify as far as I can see but the newsletter I referred to above states that the penalty is calculated on the income tax liability from the directorship (I think!). I am hoping that nothing has been introduced since that newsletter was issued by revenue that would mean the penalty is calculated on all income from all sources. If anyone knows of anything else in relation to this I would appreciate the help.

I do appreciate all the advice and pointers.
 
I'm not sure what the confusion is here -


The legislation which I've already quoted indicates:
  1. a chargeable person is obliged to file a return
  2. S.959B (formerly S.950) clearly excludes from the definition of a chargeable person, a director of a non-trading, dormant company
This is made quite clear in the Notes for Guidance ([broken link removed]) at page 4:

"This section excludes certain persons from the definition of "chargeable persons" in section 959A, namely it excludes persons:

whose only source of income is emoluments taxed under the PAYE system (under Part 42) provided that person is not a Director of a trading company ]


But in this case it's a trading company.
 
But in this case it's a trading company.

If that's the case then OP is goosed, but they haven't actually said that it's a trading company as far as I can see... :confused: Just that they aren't exempt from filing a return, but it's not clear why they think this is the case, so I think first thing's first, we need to clarify whether or not the company is a trading company... over to you OP?
 
Tommy - I googled your comment above and found a newsletter from 1999 from revenue at [broken link removed] It states that the penalty is based on your income from the directorship. So 10% of zero is zero! I'll print that out, highlight the relevant section and send it in to them. Thank you for your help. Much appreciated. I'm presuming that there has been no change to the legislation since then?

The issue is not whether a return should have been made or not. It should have been submitted. There is no question about that. The question now is what income tax liability should be used to calculate the penalty. The legislation doesn't specify as far as I can see but the newsletter I referred to above states that the penalty is calculated on the income tax liability from the directorship. I am hoping that nothing has been introduced since that newsletter was issued by revenue that would mean the penalty is calculated on all income from all sources. If anyone knows of anything else in relation to this I would appreciate the help.

I do appreciate all the advice and pointers.

The legislation does specify - the surcharge is due on the total tax liability, without credit for PAYE paid in the proprietary directorship.

And I think you have misread what was in the tax briefing article Tommy linked - it says "Where the late filing surcharge applies, it is calculated on the tax liability before credit is given for the tax deducted under PAYE on the directorship income" - it goes on to give a simple example where the only income is from a proprietary directorship, but if there is other income it is included, and the tax on it calculated, and then the surcharge applied to that figure.
 
It is a trading company. My husband receives no income from the directorship (he's a director for altruistic reasons that I'd prefer not to go in to). He is a chargeable director but my reading of the newsletter I linked to previously (sorry - it won't let me pull an excerpt out) is that the penalty is based on the income from the directorship, not the total income from all sources. The legislation doesn't specify what income is used to calculate the penalty. I am hoping that my reading of this newsletter is correct and also that if revenue make this statement in a newsletter that it does apply.
 
He is a director and owns more than 15% of the share capital. Hardly altruistic.

While I agree wholeheartedly that it is ridiculous to surcharge the spouses income and then non Directorship income I think that as the provisions apply the surcharge has been correctly applied.
 
The legislation does specify - the surcharge is due on the total tax liability, without credit for PAYE paid in the proprietary directorship.

]

This is the exact point at issue.

Does the legislation state it's without PAYE paid in the proprietary directorship because if so then the OP is in the clear as all the PAYE paid is on non proprietary directorship OR all PAYE.
 
Mandelbrot - I guess then we just have to hope that someone reasonable deals with it in revenue and takes pity on us. I feel that the newsletter could be interpreted to mean only directorship income is used in the calculation but I can also see how it might be interpreted differently. I know ignorance is no excuse but we have paid all tax due every year so we might hopefully get the benefit of the doubt.
 
Joe - he is getting nothing out of this directorship. I don't want to go in to the details but he is certainly not in it for profit.
 
Mandelbrot - I guess then we just have to hope that someone reasonable deals with it in revenue and takes pity on us. I feel that the newsletter could be interpreted to mean only directorship income is used in the calculation but I can also see how it might be interpreted differently. I know ignorance is no excuse but we have paid all tax due every year so we might hopefully get the benefit of the doubt.
 
Joe - I'm sorry but I don't understand your last post. Would you mind explaining in more detail? Thanks.
 
I think that because in your original post, you said that your husband received no income from the company, people concluded that the company was not trading, or had negligible assets, etc.
Reading your subsequent posts, this is obviously not the case.
The surcharge applies to all taxes payable.
How Revenue will view the surcharge will depend on the specific facts of your situation and the reason for the failure to file returns.
You and/or your husband/ tax practioner perhaps should try to engage with Revenue, which may not be wholly unsympathetic to any extenuating circumstances.
 
I find all of this very confusing.

Is this correct,

A trading company
A proprietary Director (not sure if non-proprietary director is also included)
Who owns a % of the company
With zero income
Is late filing a return
A fine/surcharge is imposed on all income, including PAYE income
This fine is also imposed on the spouse, who has nothing to do with the company (is that because they are jointly assessed?)

What's the difference between a proprietary and non Proprietary?
 
I have encountered several Revenue staff who freely acknowledge that this particular surcharge is ridiculously punitive on proprietary directors and are happy to waive it if there is any degree of extenuating circumstances.
 
So in conclusion a director who owns more than 15% of the ordinary share capital of a trading company has to file a return and if its late the surcharge applies to the liability before any relief for PAYE paid.

The only relief from this is that a Revenue official may choose at their discretion to remove the surcharge. But this is entirely at their discretion.

Are we all agreed on that?
 
It's the same with the LPT surcharge. If a self-employed person files their LPT return late then they are liable for a surcharge of 10% of their full Income Tax liability for the previous tax year.

We all want a high percentage of compliance when it comes to stuff like this but the penalties are ridiculously disproportionate in some cases. Joe Bloggs employee doesn't have anything like the penalties for this.
 
@DB74 Agreed the difference is that if you sort out the LPT the surcharge is reduced to 100% of the LPT.
 
So you end up paying the LPT twice?

No you pay the LPT once, and you pay an income tax surcharge which is capped at the amount of your LPT liability.

There'll be uproar when the proverbial starts to hits the fan next October...
 
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