Murray Group decision 5th July

[BrilloPad]

Thank for the response.

I thought the judgement would give more clarity but it sounds like this will now lead into further mess and confusion.

It could lead to further mess and confusion. For HMRC, promoters and the users affected. This will run and run.....

[ASB]

I was thinking more about transfer of liabilty. The "normal" case is that remuneration is paid net. Payslip given with deductions and eventually a P60.

The payment may or may not be made to hmrc. But the employee has in effect a certificate of tax deducted and assuming that paye has been calculated everything adds up nicely on the employees tax return.

But that isnt the case here.

Unless P60 etc are reissued for the years showing correct taxes deducted (even though only a percentage will be paid by the liquidators) then a user refiling their return has not got anything to in effect offzet the additional liability againt.

What happens with unpaid paye seems todepend on whether it was claimed to have been deducted in the first place. In this case it was not.

[BrilloPad]

I was thinking more about transfer of liabilty. The "normal" case is that remuneration is paid net. Payslip given with deductions and eventually a P60.

The payment may or may not be made to hmrc. But the employee has in effect a certificate of tax deducted and assuming that paye has been calculated everything adds up nicely on the employees tax return.

But that isnt the case here.

Unless P60 etc are reissued for the years showing correct taxes deducted (even though only a percentage will be paid by the liquidators) then a user refiling their return has not got anything to in effect offzet the additional liability againt.

What happens with unpaid paye seems todepend on whether it was claimed to have been deducted in the first place. In this case it was not.

It wod be interesting to know what went on the original tax returns.

[Iliketax]

I was thinking more about transfer of liabilty. The "normal" case is that remuneration is paid net. Payslip given with deductions and eventually a P60.

The payment may or may not be made to hmrc. But the employee has in effect a certificate of tax deducted and assuming that paye has been calculated everything adds up nicely on the employees tax return.

But that isnt the case here.

Unless P60 etc are reissued for the years showing correct taxes deducted (even though only a percentage will be paid by the liquidators) then a user refiling their return has not got anything to in effect offzet the additional liability againt.

What happens with unpaid paye seems todepend on whether it was claimed to have been deducted in the first place. In this case it was not.

This is not my area but for the purposes of self-assessment, I think that the PAYE regulations (reg 185) say that an individual can deduct "any tax treated as deducted" and this means any tax which the employer was liable to deduct from payments but failed to do so. If that is right, it doesn't matter if it was claimed to have been deducted or not. Whether that is right is beyond me. But my view is that is wrong in the Murray Group context as the SC confirmed that it was the payment to trust that created the earnings, not the creation of the sub-trust or the making of the loan. For self-assessment purposes, the regs require "a payment to the taxpayer" which is different to a "payment to an employee". It is subtly different as an employee is defined as the person who receives the payment (in this case the trust, not the individual who is the taxpayer). But as I say, I have no idea if I'm right.

Some people say that the Murray Group decision throws all sorts of spanners into the disguised remuneration works. In particular, they rely on para 69 of the decision ("if, on a proper analysis, the sums paid into the Principal Trust are emoluments in the first place, these provisions cannot apply as otherwise the taxpayer would taxed twice on part of the same earnings"). My view is that ignores other parts of the decision and also what Part 7A (and the legislation that introduced it) actually says. Take, for example, s554Z5. This is very clear that relief from double tax is available. But for it to be available the first lot of tax must have been "paid in full" (or terms have been agreed with HMRC to discharge that liability). So to me, there is no issue with the disguised remuneration rules.

Some people also say the decision creates all sorts of issues into the 2019 loan charge. My view is that that is nonsense. While I can see that there may be tweaks to the draft published in March, there is nothing in this decision that means any big changes are needed. There are still issues that HMRC is considering (e.g. in what circumstances the payment of the PAYE (and perhaps NIC) can be passed to the employees.

As I've said before, I don't work for HMRC and have no services to sell.

[ASB]

Iliketax.

I, of course, am completely unqualified. What i was thinking was that:

- transfer of liability implies that the employer has undertaken the liability on behalf of the employee by deducting it from wages rather than the charge to paye arising

- potentially by getting paye wrong an employer could deduct 500 instead of 750. The 500 is still the liability not the 750. The 250 could not be "transferred" because it is already the emplyees liability.

This seems more like the second than the first.

However, as you point out "liable to deduct" implies the liability falls with the employer even if they simply got it wrong.

[centurian]

This is not my area but for the purposes of self-assessment, I think.....

TLDR.

Sorry, I am sure what you say is technically sound, but I couldn't get my head around it with specific references to judgements and tax law - the overall point you were trying to make was lost on me. Mind posting a summary for thickos like me.

[webberg]

Whilst I'm sure "I like tax" is quite capable of speaking for her/himself, my takeaway was that if tax should have been deducted from a payment, then the recipient of the payment is entitled to a credit for that, regardless of whether HMRC has collected it.

With the caveats mentioned in her/his post, I would agree. (I could add some further caveats perhaps).

Clearly that is a position that will be unwelcome in HMRC and they are sure to be using all the present tools at their disposal (and perhaps some new, retrospective ones) to continue their campaign against individuals.

(My apologies if my summary is inaccurate).

[Iliketax]

Mind posting a summary for thickos like me.

Sure.

1. HMRC may not be get income tax from the borrower if the employer should have operated PAYE. But I don't do that for a living.
2. The decision has no practical impact for the current disguised remuneration rules or for the expected April 2019 rules.

[Iliketax]

However, as you point out "liable to deduct" implies the liability falls with the employer even if they simply got it wrong.

Yes.

By transfer of liability, I mean that the obligation to operate PAYE moves to the employee. HMRC are thinking about doing that if (i) the employer is bust, (ii) the employer cannot afford to pay it, or (iii) where there is an obligation on the end user because of the host employer rules. They are going to have a think about what to do, including the practicalities (e.g. how do you know an employer cannot afford it). At the end of the day, no one knows how this will work for the April 2019 charge yet.

[jbryce]

My sanity.

So, for the sake of my sanity,...

I worked for ClientCo who, via a tortuous route, saw X cash deposited in my account.
Who is liable for the tax?
Me as the Employee?
ClientCo as the Employer?
The loan company? (who didn't even ask me to sign loan documents until after payments were made)

Or - are we all liable?