“On making a relevant payment to an employee during a tax year, an 20 employer must deduct or repay tax in accordance with these Regulations by reference to the employee's code, if the employer has one for the employee.”
“(1) For the purposes of PAYE regulations, a payment of, or on account of, PAYE income of a person is treated as made at the earliest of the following times— 40 Rule 1 5 The time when the payment is made. Rule 2 The time when the person becomes entitled to the payment. Rule 3 If the person is a director of a company and the 5 income is income from employment with the company (whether or not as director), whichever is the earliest of— (a) the time when sums on account of the income are credited in the company's accounts or records (whether or not there is any 10 restriction on the right to draw the sums); (b) if the amount of the income for a period is determined before the period ends, the time when the period ends; (c) if the amount of the income for a period is not determined until after the period has ended, the time when the amount is 15 determined. … (2) Rule 3 applies if the person is a director of the company at any time in the tax year in which the time mentioned falls. (3) In this section “director” means— 20 (a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that board or body, (b) in relation to a company whose affairs are managed by a single director or other person, that director or person, and (c) in relation to a company whose affairs are managed by the 25 members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the company's directors (as defined above) are accustomed to act. (4) For the purposes of subsection (3) a person is not regarded as a 30 person in accordance with whose directions or instructions the company's directors are accustomed to act merely because the directors act on advice given by that person in a professional capacity.”
“(1) This regulation applies for the purpose of determining— … (b) the difference mentioned in section 5 59B(1) of TMA (payments of income tax and capital gains tax: difference between tax contained in self-assessment and aggregate of payments on account or deducted at source), … 10 (2) For those purposes, the amount of income tax deducted at source under these Regulations is the total net tax deducted during the relevant tax year (“A”) after making any additions or subtractions required by paragraphs (3) to (5). … 15 (5) Add to A any tax treated as deducted, other than any direction tax, but— (a) only if there would be an amount payable by the taxpayer under section 59B(1) of TMA on the assumption that there are no payments on account and no addition to A under this paragraph, and 20 then (b) only to a maximum of that amount. (6) In this regulation— “direction tax” means any amount of tax which is the subject of a direction made under regulation 72(5), regulation 72F or regulation 25 81(4) in relation to the taxpayer in respect of one or more tax periods falling within the relevant tax year; “relevant tax year” means— … (b) in relation to section 59B(1) of TMA, the tax year for which 30 the self-assessment referred to in that subsection is made; … “tax treated as deducted” means any tax which in relation to relevant payments made by an employer to the taxpayer in the relevant tax year— 35 (a) the employer was liable to deduct from payments but failed to do so, or … “the taxpayer” means … the person whose self-assessment is referred to in section 59B(1) of TMA (as the case may be).” 40 21. It is thus the case that the creditable tax under section 59B(1) TMA generally includes PAYE tax which the employer was liable to deduct under the PAYE 7 Regulations whether or not the employer has in fact deducted that tax. But this is subject to a number of exceptions for certain amounts of PAYE, collectively referred to as “direction tax”
“(6) If, on an appeal notified to the tribunal, the tribunal decides— (a) that the appellant is overcharged by a self-assessment; … (c) that the appellant is overcharged by an assessment other than 25 a self-assessment, the assessment or amounts shall be reduced accordingly, but otherwise the assessment or statement shall stand good. (7) If, on an appeal notified to the tribunal, the tribunal decides (a) that the appellant is undercharged to tax by a self-assessment 30 … (c) that the appellant is undercharged by an assessment other than a self-assessment, the assessment or amounts shall be increased accordingly.”
“(1) Where earnings are paid to an employed earner and in respect 10 of that payment liability arises for primary and secondary Class 1 contributions, the secondary contributor shall (except in prescribed circumstances), as well as being liable for any secondary contribution of his own, be liable in the first instance to pay also the earner's primary contribution or a prescribed part of the earner's primary 15 contribution, on behalf of and to the exclusion of the earner; and for the purposes of this Act and the Administration Act contributions paid by the secondary contributor on behalf of the earner shall be taken to be contributions paid by the earner.”
“(1) As respects any employed earner's employment— (a) where there has been a failure to pay any primary contribution which a secondary contributor is, or but for the provisions of this 25 regulation would be, liable to pay on behalf of the earner and … (ii) it is shown to the satisfaction of an officer of the Board that the earner knows that the secondary contributor has wilfully failed to pay the primary contribution which the secondary 30 contributor was liable to pay on behalf of the earner and has not recovered that primary contribution from the earner; … the provisions of paragraph 3(1) of Schedule 1 to the Act (method of paying Class 1 contributions) shall not apply in relation to that 35 contribution. …”
“It is clear that the usual circumstances where these provisions may apply will be where an employee has received a payment gross and there will have been no deduction of tax because the payment was 35 made gross. If, on the other hand, the employee is paid net, he or she will normally receive a document required by employment legislation, but not by tax legislation, indicating how the net amount is calculated. In the modern world the fact of payment in an amount net of tax will normally constitute deduction, whether or not the employer also effects 40 any money movement of the sum which is deducted, for example by transferring it to a tax reserve. There will be a pre-existing entitlement to gross pay and a deduction from this is effected by paying the net amount due after subtracting the tax. This accords with reg 14, where 13 the employer has to ascertain, among other things, the tax and to deduct it 'on making the payment in question'. Regulations 49(5) and 42(3) would normally operate where the employer had wilfully paid an employee gross and the employee knew this. Although the employer has to prepare a 5 deductions working sheet under reg 38, the preparation of that sheet does not, in these normal circumstances, constitute or contribute to the making of the deduction. It is, as the regulation makes clear, the making of a record and one of the things that has to be recorded is 'the amount of tax, (if any), 10 deducted or repaid on making the payment' (see reg 38(3)(c), which is one of a number of instances where the point of deduction appears to be on making the payment). Again, although the employer is required to give a P60 certificate to the employee and to provide the Revenue with forms P14 and P35, the giving and providing of those documents 15 does not constitute the deduction of tax. The documents record among other things the deduction of tax.”
“Those matters would no doubt contribute to a deduction of tax if, additionally, the tax was accounted for and paid. But in this case the employer, to Mr McVeigh's knowledge, has neither accounted for nor paid the tax and these failures were wilful, or so the Revenue have 45 concluded upon a basis which was, in my judgment, not perverse. In 14 these circumstances I consider that it would be a misuse of language to say that the bookkeeping and accounting alone, without actual payment, and without any of the procedures which the 1993 regulations require, constituted a deduction of tax from the gross payment. There was, on the contrary, a wilful 5 failure to do anything relating to tax obligations, beyond making some internal paper entries which the company proceeded to ignore for tax accounting purposes and which Mr McVeigh also ignored when he submitted his own tax returns. That, in substance, is what, according to Mr Shortland's 10 affidavit, the Revenue decided in making their direction. In my judgment there was no deduction of tax by the company, and the direction of12 September 1994 , which is challenged, was a sustainable direction in law and in fact.”
“(1) General earnings consisting of money are to be treated for the 30 purposes of this Chapter as received at the earliest of the following times— Rule 1 The time when payment is made of or on account of the earnings. Rule 2 35 The time when a person becomes entitled to payment of or on account of the earnings. Rule 3 If the employee is a director of a company and the earnings are from employment with the company (whether or not as director), whichever 40 is the earliest of— 20 (a) the time when sums on account of the earnings are credited in the company's accounts or records (whether or not there is any restriction on the right to draw the sums); (b) if the amount of the earnings for a period is determined by the end of the period, the time 5 when the period ends; (c) if the amount of the earnings for a period is not determined until after the period has ended, the time when the amount is determined. (2) Rule 3 applies if the employee is a director of the company at 10 any time in the tax year in which the time mentioned falls. (3) In this section “director” means— (a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body, (b) in relation to a company whose affairs are managed by a 15 single director or similar person, that director or person, and (c) in relation to a company whose affairs are managed by the members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are 20 accustomed to act. (4) For the purposes of subsection (3) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity. 25 (5) Where this section applies— (a) to a payment on account of general earnings, or (b) to sums on account of general earnings, it so applies for the purpose of determining the time when an amount of general earnings corresponding to the amount of that payment or 30 those sums is to be treated as received for the purposes of this Chapter.”
“… assuming that the sum is bona fide voted to be paid as remuneration, it seems to me that the amount, whether 5 it be mean or generous, must be a matter of management for the company to determine in accordance with its constitution which expressly authorises payment for directors' services. Shareholders are required to be honest but … there is no requirement that they must be wise and it 10 is not for the court to manage the company.”
“The real test must, I think, be whether the transaction in question was a genuine exercise of the power. The motive is more important than the 15 label. Those who deal with a limited company do so on the basis that its affairs will be conducted in accordance with its constitution, one of the express incidents of which is that the directors may be paid remuneration. Subject to that, they are entitled to have the capital kept intact. They have to accept the shareholders' assessment of the scale of 20 that remuneration, but they are entitled to assume that, whether liberal or illiberal, what is paid is genuinely remuneration and that the power is not used as a cloak for making payments out of capital to the shareholders as such.”
“… the case does show that if the label of remuneration does not 35 square with the facts, the facts will prevail and the result may be an unlawful distribution, even if the directors in question intended no impropriety. Later in his judgment Oliver J recognized that, observing (at 1044) ‘In the absence of any evidence of actual motive, the court must, I think, look at the matter objectively and apply the standard of 40 reasonableness.’ ”
“The judge drew a distinction between two meanings of ultra vires which he called the "narrow sense" and the "wider sense." As I understand his judgment, he treated ultra vires in the narrow sense as covering any transaction outside the express or implied powers of a 10 company stated in its memorandum of association and ultra vires in the wider sense as covering a transaction which, although within such powers, is entered into in furtherance of ‘some purpose which is not an authorised purpose’:[1982] 1 Ch. 478 , 497. Although it is not entirely clear, he appears to have treated transactions which are ultra vires in 15 his narrow sense as being wholly void as opposed to those which are ultra vires in the wider sense, which are capable of conferring rights on third parties who have no notice of the invalidity: see p. 499. He then apparently held that the guarantee by the plaintiff was ultra vires in the wider sense and, since British Steel Corporation had notice of that fact, 20 it was unenforceable by British Steel Corporation.”