Payment not wilfully withheld

The taxpayers were directors of a company that liquidated in October 2010 with unpaid PAYE liabilities.

HMRC made determinations under Income Tax (PAYE) Regulations 2003 (SI2003/2682) reg 72 shifting responsibility for the tax to the taxpayers.

The department claimed the employer wilfully failed to deduct the right amount of tax from the PAYE payments and that the employees received the relevant payments and were aware the tax was not paid.

The Revenue noted the company chose to change its payment method from mainly dividends to mainly salaries and accused the business of making the decision in the knowledge it might run into financial difficulties.

The taxpayers appealed. They said the payroll had been by an independent third party for many years without problems. The decision to change the method of payment was to spread the tax due over the year rather than have to pay a large bill...