Originally posted by starstruck
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Or alternatively, I did a bit of reading...
In March 2017 said:
5. Proposals on how the tax and NICs from a DR employment income charge will be collected from the appropriate person are not included in this technical update. There will be a technical consultation on the detail of those changes later in 2017.
Where the employer has been dissolved, they said:
Sections 7, 8 and 9 of the Taxes Management Act 1970, set out the employee’s responsibility to return the employment income to HMRC by making a self-assessment return. As a result the employee is responsible for reporting the income and paying the tax to HMRC.
- Section 7: "Every person who ... is chargeable to income tax ... for any year of assessment ... shall ... give notice to an officer of the Board that he is so chargeable"
- Section 8: "For the purpose of establishing the amounts in which a person is chargeable to income tax ... for a year of assessment, and the amount payable by him by way of income tax for that year, he may be required by a notice given to him by an officer of the Board to make and deliver to the officer [a tax return]"
- Section 9: "... every return ... shall include a self-assessment, that is to say ...an assessment of the amounts in which... the person making the return is chargeable to income tax ... for the year of assessment; and ... an assessment of the amount payable by him by way of income tax, that is to say, the difference between the amount in which he is assessed to income tax ... and the aggregate amount of any income tax deducted at source"
So that basically says to do a tax return and tell us how much tax you have to pay. It also only allows tax withheld at source to be deducted from that liability. It doesn't say anything about tax that you can pretend to be deducted.
So I then looked at regulation 185. In some circumstances, this pretends that amounts that an employer was liable to withhold, but didn't, as tax deducted at source. But if there is no employer, this can't apply.
So what HMRC said in the technical note for a dissolved employer makes sense. The employee has to pay the tax on the April 2019 loan charge. I can't see that anything more is needed for the employee to have to pay the tax when the employer is dissolved.
But I then looked at s203J TA88 which I remembered had a similar provision to regulation 185 (it did, and it made my geeky Friday that I could remember the right section number, first time, from something that was repealed 14 years ago) and the TLR commentary on the then new PAYE regulation. It was silent on the s203J(5) point (para 882 - just checked the number). It doesn't mention s203J but does talk about their change being 'the better view' but does not give me an extra insight into regulation 185. Section 203J(5) never made it to ITEPA (just wasn't needed with regulation 185).
Why did I go through the hassle of looking at stuff over 14 years ago? In the technical note that came out on 1 December 2017 HMRC also said that where the employer exists but is unable to pay (e.g. insolvent but not struck off) then they will use regulation 80 to quantify the PAYE due and make a regulation 81 direction to transfer it to employees. I read both of these and, as the Part 7A charge is a notional payment, it make sense what they said. But that doesn't address the point about regulation 185. So if HMRC did not make a regulation 81 direction then the employee could say that regulation 185 does apply to mean that the employee could pretend that PAYE had been deducted for self-assessment purposes. So that's why HMRC had to say that. But I understand from this forum that the employers of contractors have been dissolved rather than left with no cash. If they are still around, don't forget that you should not believe anything written by a random stranger on the internet. There is likely to be a lot more to the technical arguments and if the trust is offshore, HMRC has its new 200% penalty regime waiting for someone to play with.
For the avoidance of doubt, regulation 185 does not help get out of the April 2019 loan charge because s554Z5 looks at tax actually paid. The PAYE pretence doesn't apply.
Or put it another way. HMRC said something. I checked, and double checked, what they were saying made sense.
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