At the end of January many people are worried about their tax bills. We have some tips on how to agree a time to pay arrangement with HMRC. If a company has failed to pay PAYE, we explain the circumstances in which that debt can be transferred to the company’s directors. Looking forward to April, we discuss how couples may want to rearrange their holding of joint property.
Below we share just part of one of the above 3 tax tips – see the side boxes on this page to learn how you could subscribe to receive the full 3 tax tips every month.
When a company goes into liquidation leaving PAYE debts, HMRC can pursue the company directors for the unpaid tax and NIC. They do this by issuing “directions” against named directors under reg 72 of the PAYE regulations 2003 and reg 86 of the Social Security regulations 2001.
If your client is faced with such a direction, check whether these three pre-conditions for the direction have all been met:
- The employer did not deduct PAYE
- The failure was wilful and deliberate
- The employee received the remuneration knowing that the employer had wilfully failed to deduct the tax.
For NIC the director has to know that the employer wilfully failed to pay the NIC, rather than just to deduct it.
Where the PAYE debt has arisen because the director’s overdrawn loan account has been discharged by the crediting of salary, the PAYE may have been calculated but not necessarily deducted, as the bookkeeping entries alone do not constitute a deduction of PAYE. This was the conclusion of the judge in the case of S West v HMRC who decided in favour of the taxpayer.
In a similar case: P Marsh & D Price, the directors were found to be personally liable for the PAYE debt as they were aware that the company did not have the funds to pay the PAYE liability. Our employment tax experts can help you assess whether your client has a good defence against a PAYE or NIC direction.