Are company directors required to be in Self Assessment?

I attended a tax update course earlier this year which discussed a recent case raising the question of whether or not a taxpayer had to file a self assessment tax return because he was a director of a company. 

The gov.uk guidance states that a company director must register for self assessment and send a personal SA tax return to HMRC every year. 

https://www.gov.uk/running-a-limited-company

However, a director whose only income is taxed under PAYE or who has no taxable income at all is NOT required to report to HMRC or to register for self assessment. 

The tribunal considered that the gov.uk guidance did not have the force of law and concluded that the guidance notice does not accurately reflect the law. 

I was somewhat surprised to learn therefore that when a client contacted HMRC to be removed from self assessment as all her earnings were taxed under PAYE, HMRC advised her that she could not, because she was the director of her husband's company. She was advised that she had to resign, or she would still have to submit a tax return. 

I offered to follow this up with HMRC on the client's behalf, but she just decided it was simpler to resign as a director, which she did. She has now been taken out of self assessment. 

Not only does this contradict the findings of the tribunal in the case mentioned (Mohammed Salem Kadhem v HMRC TC05929 06.06.17) but there seem to be mixed messages about company directors and whether or not a tax return is required. 

I've had discussions with other practitioners on this matter and they've had conflicting advice from HMRC; some being advised that a tax return IS required and some saying not. 

The gov.uk guidance remains as it was prior to the tribunal, which further confuses the issue. 

Has anyone else experienced this situation?

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  • The legal position is that directors are not required to file tax returns unless they have income that is not fully taxed.  HMRC often say that directors MUST file SA returns but this is a requirement of HMRC and not based on the lasw as it currently stands.  I have had HMRC confirm this to me although helpline staff rely on guidance and scrips which are not correct in law.

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