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Wilful knowledge

06 September 2016
Issue: 4566 / Categories: Tax cases

S West (TC5285)

Conditions to transfer PAYE liability from employer to employee

The taxpayer was the director and shareholder of A. He drew money from the company during the year and recorded these as loans in the director’s account. At the end of the year the company paid remuneration and a dividend into the account extinguishing the loan. For the years ending 30 April 2007 to 2010 the accounts showed outstanding loans. In 2011-12 an insolvency practitioner advised the taxpayer that the company should be put into liquidation. The adviser also said that the company could not pay the taxpayer any dividends because there were insufficient profits so it would have to pay him by way of salary. The taxpayer gave his accountant instructions to prepare accounts in line with the advice. The PAYE and National Insurance for the remuneration were shown on the balance sheet as current...

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