Duty breached

The respondents were directors of PS Ltd each holding 50% of the share capital. PS Ltd held 100% of the share capital of P(DS) Ltd and P(SS) Ltd. These companies were known together as the composite companies. P(DS) and P(SS) acted as sole corporate director and company secretary of each of the composite companies and the respondents were directors of P(DS) and P(SS).

Relying on Extra-statutory Concession C9 the respondents claimed that the composite companies were not associated. Subsequently in August 2004 they received professional advice saying that the concession did not apply to them and the composite companies were liable to pay corporation tax.

The composite companies continued to pay dividends which HMRC said would leave them with insufficient reserves to pay the corporation tax due.

HMRC commenced proceedings against the respondents seeking to make them liable to pay the tax.

In the High...