Director forced to pay his company’s tax debt
Following a series of failed businesses, HMRC finally ran out of patience and passed the company’s unpaid PAYE liability to the sole director.
Replies (16)
Please login or register to join the discussion.
When studying we were always told that director's are responsible for debts incurred when permitting the company to continue to trade when they knew, or should have known the company was insolvent. So about time HMRC started to collect from company directors who abuse the limited liability status.
I like the dryness exhibited by the FTT in saying:
"They noted that having already experienced how difficult the roadside assistance industry was, a prudent/reasonable person would have taken steps to avoid repeating past errors."
This is news to celebrate.
We do our bit with failed tenants, word gets passed to other local landlords as they try to phoenix their entities, but the numbers who just play the system is unbelievable and it is about time someone started catching them and making them pay.
About time. HMRC got stuck into this sort of case, it is far too common. if HMRC spent 10% of the money they are wasting on MTD on tackling real issues like this they would be able to pay for the other 90% of MTD out of the proceeds both from direct compliance collection, and far more importantly, disincentive for others. if you know you are going to get caught you don't take a risk.
That said this chap still seems to have come out streets ahead however if he has serially walked away from his tax debts and only been stuck up for one of them.
Seems like this director may have been operating a little close to the wire for some time:
https://www.dailyecho.co.uk/news/9998893.cowboy-parking-firm-making-hamp...
The headline is wrong. There is nothing about PAYE liabilities in this company in the case report, because section 121C SSAA92 applies only to NICs, as is apparent from para 1 of the decision. Sloppy!
There is no provision that passes PAYE liabilities to negligent/fraudulent directors; there is now an ability for HMRC to seek security for PAYE debts, but that's not the same thing and was not the subject of the case.
Nor, despite what some commenters suggest, is there anything new here. HMRC have been very active with s121C and all the security rules (VAT especially) for some time - I've dealt with many cases myself.
But presumably HMRC could potentially have done a reg 72 determination for such a bust company director (assuming he received the dosh):
https://www.legislation.gov.uk/uksi/2003/2682/regulation/72/made
https://www.gov.uk/hmrc-internal-manuals/compliance-operational-guidance...
Although I note it can be a complex point. See: https://www.taxation.co.uk/articles/2012-06-20-290601-recovery-position
The above article also confirms that to recover from the employee in such a case, HMRC must show (under Condition B, as Condition A won't be relevant presumably) that “the employer had wilfully failed to deduct the amount of tax which should have been deducted from those payments".
This willful default point is supported at para 53 here:
https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j8905/TC0...
And see this case: https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j9262/TC0...
And: https://www.rpc.co.uk/perspectives/tax-take/tribunal-rejects-hmrcs-attem...
PS I don't know why Aweb don't provide a case link: https://www.bailii.org/uk/cases/UKFTT/TC/2022/TC08450.html
I agree they could have used reg 72, but they didn't or at least it wasn't part of the case.
On your PS, there was a link at the end of the paras headed "Reasonable behaviour".
And said entrepreneur is a director of JLE HAVANT LTD whose August 2020 accounts show negative net assets of £892K and £781K of creditors for ..... taxation and social security. He might be concerned about whether the company will pay him the £44K shown as owing to him, and if it has been repaid to him at the expense of HMRC, whether this might be a fraudulent preference.
Tax law aside, there are lots of provisions in the Companies Acts for dealing with delinquent directors, but no one seems to enforce them.
... said company apparently having claimed between £10K and £25K a month in CJRS grants between March and September 2021. Not that this in any way paints a picture of course.
... and back in 2012 (as per link above kindly supplied by Ivor Windybottom):
* he was also the Director of Shoal Enforcement Ltd who (according to the Southern Daily Echo) were operating illegally - as well as, you guessed it, preparing to be kicked off the CH register for failure to make timely submissions.
Why is previous behaviour not taken into account when determining the penalty?
Are you referring to CH penalties? In these cases the FTT does indeed take previous behaviour very much into account - see paras 41-45 of the FTT decision. HMRC usually only go for serial evaders and Phoenixers under these provisions and the security ones and they provide evidence in detail of past wrongs.
"Once is happenstace, twice a coincidence, three times is enemy action" Goldfinger, - Ian Flemming.
Surely we're getting to the time where companies are not allowed to employ people because the directors are not "fit and proper" people? When they are refused a licence and still employ people then they should be liable to criminal prosecution under the Modern Slavery Act.
Until the penalties outweigh the risk then people will continue to have HMRC for mugs.