Professional Contractors and Freelancers who are a Director of a Limited Company must file a Self-Assessment tax return.
All income from 6th April 2008 to 5th April 2009 needs declaring on the SATR. The filing deadline is 31st January 2010 if completed on-line and 31st October 2009 for paper filing.
SATR's are usually sent out by HM Customs and Excise in April
following the end of the tax year. If you do not receive one and you
are a Director you must contact HMRC to send a paper one to you or
register on the Government Gateway for a unique tax reference (UTR) to
file on-line. As the tax payer and Director, the liability falls on
you to file a return.
If you receive an SATR and are paid under PAYE, you are still
required to file it even if you have no further tax to pay. Failing to
do so will incur a penalty of £100.
Who needs to file a Self-Assessment tax return?
Anyone who receives additional income, both earned and unearned
income such as dividends; that was not subject to PAYE where tax and
national insurance contributions will have been deducted accordingly
will have to file a tax return. The following people have to file one
regardless of whether an additional income has been earned:
- A Director of a limited company (except for not for profit businesses)
- A Self-Employed person
- A member of a Partnership
- A Trustee
- Anyone receiving foreign income who is a UK tax resident
- Any minister of any faith
- Anyone receiving income from a trust
- Anyone receiving income from a deceased estate where further tax is due
- Members or 'Names' of Lloyds
- A person receiving rental income from property (if paid PAYE and
rental income is less than £2500 per annum, it may not be necessary)
- A person who is deceased and has filed returns in previous years will need to have a tax return filed by a representative
By a rule of thumb, anyone receiving income that is NOT taxed at
source will be required to file a personal tax return. Anyone who
needs to file a return but has not received one can request the form
from their tax office.
Persons that have received additional money by way of selling
shares, a large inheritance, sold a second property may also be subject
to capital gains tax and will have to file a tax return.
Please note that all the 'useful links' are at the end of the article.
Employees subject to PAYE
There are certain circumstances for people who are paid under the
PAYE regime which will require that person to file a personal tax
return:
- A person who's annual income is £100,000 or more
- Anyone receiving income from savings and/or investments over £10,000 gross
- Anyone who has claimed £2,500 in professional subscription fees against profit
Any Professional Contractor or Freelancer trading through an Umbrella structure with earnings over £100,000 must file a SATR.
The 'Service Company' Question Page TR4 of the SATR
Two years ago HMRC introduced a section for 'Service Companies' thus
making it easy for HMRC to determine who is a service company.
As Professional Contractors and Freelancers are shareholders of their limited companies this section must be completed.
Your IR35 status has nothing to do with this question. As far as we
are concerned, if you have traded inside IR35 and made a Deemed Payment
under PAYE in March 2009 and taken no dividends; you are still a
shareholder of the company and have supplied services. There may also
be circumstances whereby you have taken dividends from accumulated
profit from previous years. Remember, being on the VAT Flat Rate
Scheme can make profit for your company with the Flat Rate surplus.
HMRC's guidance on completing this section is as follows:
“Box 1 if you provided services through a service company
Complete this box if you provided your services through a service company. You provided your services through a service company if:
• you performed services (intellectual, manual or a mixture of both) for a client (or clients), and
• the
services were provided under a contract between the client(s) and a
company of which you were, at any time during the tax year, a
shareholder, and
• the
company’s income was, at any time during the tax year, derived wholly
or mainly (that is, more than half of it) from services performed by
the shareholders personally.
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Do not complete this box if all the income you derived from the company was employment income.
Example
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Services are provided through a service company as described above.
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Salary received from service company
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£15,000
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Dividends from UK companies including tax credit
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£50,000
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Dividends from a shares portfolio
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£5,000
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Total
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£70,000
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Total amount to be entered
(excluding the shares portfolio dividends in the service companies box
1 on page TR 4 is £65,000”.
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How to file your Self-Assessment tax return
There are two ways to file your return:
- By paper submission and post
- Using HMRC software or commercial software on-line through the Government Gateway
Paper Version
Completed paper versions have a filing deadline of 31st October following the end of the tax year. Returns or the request for you to file a return received on or after 31st
July must be filed within 3 months of the date of notification to file
a tax return. Returns or a notification to file a SATR received after
these deadlines will automatically receive a penalty of £100.
HMRC will calculate any tax that is owed and will advise you of payments to be made by 31st January. Any tax owed under £2,000 will be collected by amending your tax code.
On-Line Filing
On-line filing is simpler, a guaranteed way of ensuring HMRC have received it; and the filing deadline is extended to 31st
January following the end of the tax year. If you want owed tax (under
£2,000) to be collected by your tax code the deadline to file on-line
is 31st December.
There are some people who are excluded for using the on-line system.
With on-line filing you have the option of completing part of the
return, saving it and returning to it at a later date. You will
receive an immediate confirmation from HMRC of the filing and details
of any tax that is due. There is also a possibility of receiving a
refund if is due, faster than by paper filing.
It is advisable to use a broadband connection when using the
system. For dial-up connections, if you are sending attachments it is
advisable to not use the service in day time peak hours.
You can file Self-Assessment tax returns SA100, SA800, SA900 and
supplementary pages using the on-line HMRC system for which you can
download the software from their site.
You are also able to:
- Amend (but not file a new return) details for the previous year
- Make a claim to request a reduction on payment on account
- Make a claim to request a refund if one is due
- View up to three years retrospective returns
- Attach pdf documents up to 5MB (any size above will be rejected,
marked as not filed and penalties may apply for incomplete submission)
Commercial Software Filing
Commercial software is available for on-line filing and is used
largely by Accountants to file on behalf of their clients. Please ask
us if you require us to file on your behalf.
How to complete your Self-Assessment tax return on-line
Firstly, you need to register on the Government Gateway. Please
note that it usually takes around 7 days to receive your user ID and
digital certificate through the post. You will need your unique tax
payer reference (UTR) and national insurance number to hand.
HMRC have a detailed demonstration
that takes you step by step through the process of completing your
return. There are also help prompts labelled '?' for each question
should you need assistance.
How to complete your paper Self-Assessment tax return
With your SATR you will receive a booklet explaining how to complete the return. HMRC also have some detailed worksheets for reference.
Understanding your Tax Bill
Balancing Payments
Any balancing payment that you owe from the previous year will be added to your tax statement.
Example
For the Tax year 2007-08 your tax bill was £5,000. You have made
payments of £2,500. The balancing payment of £2,500 is due for
payment on January 31st 2010. If there had been any unpaid
tax from the previous year/s, this would be added and would include and
interest and penalties.
Payments on Account
Tax due to be paid under £1,000 will not have to be paid on account; a single payment will be due on 31st January 2011 for the tax year 2008/9.
If it is over this amount, it will be spread over two payments.
Example
For the Tax year 2008-09 your tax bill was £8,000. Payments on account are assessed for the current tax year 2009-10, at the amount of the 2008-09 tax bill.
You will have a payment on account of £4,000 on 31st January 2010 and £4,000 on 31st July 2010.
When your tax return for 2009-10 is filed on 31st January 2011, any payments on account are deducted from tax due in that year.
Application to reduce Payments on Account
If you have received a tax bill with payments on account and you
think that your income for the next year will be therefore less tax
being owed, you can apply to have the payments on account reduced. If
you use on-line filing you can make an application on the Government
Gateway. If you do not then you need to complete from SA303
and send to HMRC. If it is found that later you owed more tax than you
have paid on account, interest will be chargeable and penalties may be
applied.
Penalties and Interest
Any balancing payments for the previous year that have not been paid by 31st
January will be charged a daily interest of 3.5% (applicable January
2009) plus an automatic 5% surcharge. If this still has not been paid
by the second payment date of 31st July a further 5% surcharge will be added.
Where a self-assessment return is filed after the deadline an
automatic surcharge will be charged of £100. If you leave filing your
return until 31st January 2010 and should have paid tax by that date you will get an automatic 5% surcharge and daily interest of 3.5%.
Useful Links
Locating your Tax Office
Capital Gains Tax
Excluded persons for on-line filing - This link is slow to upload
Supplementary Pages
Demonstration of registering on the Government Gateway
Register on the Government Gateway
Demonstration of filing a SATR on-line
Log in page for on-line filing
SATR form SA100 2008-9
HMRC Worksheets on how to complete the paper return
Application form to reduce Payments on Account