In Phillip Marsh and David Price v HMRC [2016] UKFTT TC05288 the First Tier Tribunal (FTT) found that two directors were liable for PAYE that should have been deducted from their salaries shortly prior to their company’s failure.

Income Tax (PAYE) Regulations 2003/2682 regulation 72 allows the liability for unpaid PAYE to be transferred from the employer to the employee if the employer wilfully and deliberately fails to deduct PAYE and the employee knew this when he received remuneration.

  • Mr Marsh and David Price (the directors) were joint directors and equal shareholders of Maypole Contracts Ltd (the company).
  • The company’s financial position deteriorated and it had cash flow problems. Its PAYE and VAT were consistently in arrears.
  • Due to a lack of profits the directors swapped from a remuneration strategy of low salaries and high dividends and increased their monthly salaries..
  • The company then went into administration.
  • HMRC sought to recover the unpaid PAYE from the directors and the directors appealed.

The directors argued that regulation 72 is only applicable if PAYE is not deducted; and failure to deduct tax is not the same as failure to pay over the tax to HMRC.

  • The FTT found that although the relevant entries for gross salary and PAYE were entered into the company’s payroll records each month, actual payments to directors did not reconcile to HMRC’s payroll calculations. The directors continued to take round sums as they had before when they took dividends.
  •  It must have been clear to the directors that funds did not exist to discharge the ongoing PAYE and NIC. On that basis actual, deductions could not have been made.


This case was released the day before the decision in Stephen West v HMRC [2016] UKFTT TC05285, although the facts of this case were similar, the decision in West was in favour of the director, albeit by use of the FTT chairman’s casting vote. UPDATE: The Stephen West decision has since been overturned by the Upper tribunal, see HMRC v Stephen West [2018] TC 0100.


Our guide to: Regulation 80 and 72 assessments for PAYE

Case reference: Phillip Marsh and David Price v HMRC [2016] UKFTT TC05288