The Commissioners for HM Revenue and Customs v Stephen West
| Jurisdiction | UK Non-devolved |
| Judge | Sir Geoffrey Vos,Chancellor |
| Neutral Citation | [2018] UKUT 0100 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,29 March 2018 |
| Date | 29 March 2018 |
| Published date | 29 March 2018 |
[2018] UKUT 0100 (TCC)
Appeal number: UT/2016/0240
INCOME TAX and NATIONAL INSURANCE CONTRIBUTIONS (NICs)
– calculation of gross remuneration in an amount which, after deduction of
PAYE and NICs, would equal and extinguish liability of director to
company on director’s loan account – company insolvent and unable to pay
tax and NICs – whether tax deducted by company – whether director
received relevant payments knowing that the company had wilfully failed to
deduct PAYE – regulation 72, Income Tax (Pay As You Earn) Regulations
2003 – whether company failed to deduct and pay primary NICs and the
director knew that the company had wilfully failed to pay – regulation 86,
Social Security (Contributions) Regulations 2001
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Appellants
- and -
STEPHEN WEST Respondent
TRIBUNAL:
SIR GEOFFREY VOS, CHANCELLOR OF
THE HIGH COURT
JUDGE ROGER BERNER
Sitting in public at The Royal Courts of Justice, The Rolls Building, Fetter Lane,
London EC4 on 12 and 13 March 2018
Ms Laura Poots, instructed by the General Counsel and Solicitor to HM
Revenue and Customs, for the Appellants
Mr Tony Slater, TS Tax Limited, for the Respondent
© CROWN COPYRIGHT 2018
DECISION
1. This is an appeal by the Commissioners for Her Majesty’s Revenue and
Customs (“HMRC”) against the decision of the First-tier Tribunal (Judge John Clark 5 and Ms Sandi O’Neill) (“FTT”), on the casting vote of Judge Clark (Ms O’Neill
having dissented), to allow Mr West’s appeal against HMRC’s directions with respect
to PAYE, and a consequent assessment and amendment in relation to income tax, and
decisions with respect to national insurance contributions (“NICs”), arising in the
circumstances we will describe. 10
2. Judge Clark in the FTT refused permission to appeal, but in this tribunal
permission was given by Judge Herrington.
Background
3. Mr West was, from 2003, the sole director and shareholder of Astral Telecom
Limited (“Astral”). Astral was put into creditors’ voluntary liquidation in 2011, with 15 a deficiency on the joint liquidators’ Statement of Affairs of £146,611. That
statement showed that PAYE and NICs totalling £99,886 were owing at that time to
HMRC.
4. For a number of years, Mr West had drawn money from Astral during the year
and this had been recorded in a director’s loan account (“the Loan Account”). At the 20 end of each year, Astral would pay Mr West a small amount of remuneration and a
larger dividend, thereby extinguishing the Loan Account.
5. There was a change to this pattern from the accounting period ended 30 April
2007 onwards. Although salary and dividends continued to be paid to Mr West, the
amount outstanding on the Loan Account was not extinguished at the end of each 25 year, and it in fact increased for several years. For the year ended 30 April 2010, Mr
West was paid a salary of £5,715 and received a dividend of £51,000. The amount
left outstanding on the Loan Account as at 30 April 2010 was £40,719.
6. Towards the middle of 2011, Mr West became concerned about the state of
Astral’s business. He sought advice from an insolvency practitioner in June of that 30 year, and he was advised to put Astral into liquidation. The insolvency practitioner
also advised Mr West that Astral could not pay him dividends for that year (the year
to 30 April 2011) as there were insufficient available profits, and that payment to him
would have to be wholly by way of salary.
7. Mr West instructed his accountant to prepare a set of accounts for the 35 liquidation of Astral. He also instructed his accountant to prepare accounts showing
an amount of director’s remuneration which, after deducting PAYE and NICs, would
offset the amount outstanding on the Loan Account. At that time the amount
outstanding on the Loan Account was £129,150.
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