In James H Donald (Darvel) Limited v HMRC [2017] TC05908 the First Tier Tax Tribunal (FTT) considered whether tax self assessed by related companies could be offset against a liability incurred by a different company following an enquiry.

  • Three connected companies (Darvel, Retail and Services) entered into arrangements whereby
    • Retail and Services took a share of profits, on which Corporation tax was paid
    • The employees of Darvel received dividends from the other companies
    • This planning was designed to avoid PAYE and NICs
  • In an earlier decision; (James H Donald (Darvel) Limited & Ors v HMRC [2015] UKUT 0514 (TCC)) the Upper Tier Tax Tribunal had held that these arrangements were ineffective, and that the profits taken by Services and Retail should be taxed on the employees as salary
  • Darvel applied to the FTT for the tax paid by Services and Retail to be either refunded or offset against the additional liability under PAYE.
  • HMRC argued that the corporation tax was paid under a self assessed liability and could not be set against the PAYE due from a different company
  • The FTT held that
    • HMRC has the right to make alternative and inconsistent assessments (though this was not in point as assessments had only been raised on Darvel)
    • It had no jurisdiction to consider the self assessments made by Retail and Services
    • There was no double taxation


It seems likely that Darvel will appeal further, so we will see how the Upper Tribunal views the position.


James H Donald (Darvel) Limited v HMRC [2017] TC05908

Original case:

Dividend and LLP profit schemes fail: income is from employment


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