In Stephen West v HMRC [2016] UKFTT TC05285 the First Tier Tribunal (FTT) decided by casting vote that a director was not liable for PAYE on a bonus paid just before the company went into liquidation. Decision reversed by T, see below.

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 West was the sole director and shareholder of Astral Telecom Ltd (the company).
  • In 2011 he was advised to put the company into liquidation.
  • There were insufficient profits available to repay his overdrawn director’s loan account by way of dividend. The liquidator advised Mr West to repay the amount by way of salary.
  • His accountants processed his payroll, made the accounting entries to offset the loan account and the PAYE/NIC liability was included in the management accounts.
  • The company was subsequently unable to settle the amount due to HMRC and so HMRC sought to transfer the liability to Mr West.

Mr West argued that regulation 72 only applies when there is a failure to deduct PAYE, not a failure to pay, and that a deduction of PAYE took place when the relevant amounts were credited to his loan account.

He had acted on the advice on his advisers, there was no willful or deliberate failure on his part to deduct PAYE/NICs.

The two members of the FTT disagreed with each other as to the correct outcome of this case.  Judge Clark had the casting vote as chairman and allowed the appeal.

  • The inclusion of the PAYE liability in the company’s accounts confirmed that the relevant amounts had been deducted from the salary.
  • There was no failure to deduct PAYE and therefore regulation 72 could not apply.

The other member of the FTT, Ms Sandi O’Neill, disagreed.


The decision contrasts with Phillip Marsh and David Price v HMRC [2016] UKFTT TC05288 where directors were held liable for PAYE in a case with some similarities which was released on the previous day. 

UPDATE: This decision has since been overturned by the Upper tribunal, see HMRC v Stephen West [2018] TC 0100


Regulation 80 and 72 assessments for PAYE

Case reference: Stephen West v HMRC [2016] UKFTT TC05285