Effect of making good

A family company owned a property in which the directors lived. They paid the day-to-day bills while the company paid for structural repairs.

HMRC told the directors they were receiving a benefit in kind under ITEPA 2003 s 203. The directors decided to make good the benefit charge by making an adjustment to the their directors’ company loan accounts.

The Revenue accepted that the move covered the s 203 income tax charge but said the class 1A National Insurance was still due. Obligations under the Social Security Contributions and Benefits Act 1992 s 10 were not extinguished by the directors having made good the income tax charge.

The First-tier Tribunal concluded there could be no charge to class 1A National Insurance where there was no income tax. SSCBA 1992 s 10 and ITEPA 2003 s 2003 were interdependent and the class 1A charge could...