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

Comment

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

Links

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

Original case:

Dividend and LLP profit schemes fail: income is from employment


 

Wouldn’t it be great and think how much TIME it would SAVE you if someone:

  • READ all the latest tax news, case decisions, new legislation and articles in tax and then summarised them for you?
  • Only alerted you to things that are RELEVANT to you?

How about if that someone also:

  • Updated those summaries in REAL TIME for you
  • ADDED examples, planning points, toolkits and calculators, and
  • Linked all that information together and also provided you with CPD?

Thousands of firms of accountants and advisers are already using www.rossmartin.co.uk as their primary TAX resource.

At a cost of just £1 per day, it’s a no brainer: FREE up your MIND and your TIME (and your wallet).

And...we run our Virtual Tax Partner support service, if you need assistance with a particular query or technical issue.

Squirrel advert

Loving our content? 😍
Sign up Now!
For free tax news, cases,
discounts & special tax briefings

We hope you are enjoying this amazing Practical Tax Database here at www.rossmartin.co.uk.

 

.