S222 ITEPA - final straw?!

**Invisiblehand** · 2 April 2019, 10:30

I find the irony of Phil and Matt complaining about the LC (when they're both presumably raking it in) just too much.

Additionally, someone should tell them it probably isn't a good idea to constantly insult the people they're trying to influence. This really is playground stuff.

**starstruck** · 2 April 2019, 11:12

Originally posted by Ltdoptions View Post

Phil Manley on Twitter: "To translate Matt's nerd talk!...HMRC normally tax you on the benefit of having an employer pay the tax for you. However for the LC they will tax you on it even if the charge has already been transferred to you in the first place. Therefore you are being taxed on the tax you pay!… https://t.co/EGV21zwv00"

So if I've understand correctly (& I really hope I haven't).....if PAYE liability gets transferred down to you from non-paying / insolvent Employer.....& you pay this to HMRC.....they'll still come after you for the 40-45% tax you didn't 'make good' to the Employer??!!

The only way to avoid this is to settle?

What if all your employers (i.e. onshore/offshore scheme companies that did your PAYE, P60, P45 etc..) are gone. Like, over 10 years ago, dissolved, gone?

**Ltdoptions** · 2 April 2019, 13:55

(I think) it doesn't apply if you're employer was offshore. Or if you settle via CLSO2. But seems like anyone with a UK employer (even if long gone) is vulnerable (?)

**starstruck** · 2 April 2019, 14:29

Where's ILIkeTax when you need him/her?

**Iliketax** · 2 April 2019, 15:56

Originally posted by starstruck View Post

Where's ILIkeTax when you need him/her?

Section 222 is a deliberately penal piece of legislation. My guess is that many of the people who comment on Twitter do not understand it or its nuances (but looking at the link, MattHall1974 seems to have a fair idea).

The same with many of the people at HMRC.

The issue of how s222 applies to the April 2019 loan charge has been raised with HMRC since March 2016 but it's not clear that they have fully understood it.

It cannot apply if the employer does not exist any more. This is because there is no longer an employer.

It cannot apply if the employer does not have a presence in the UK. This is because the employer is not required to account for PAYE.

It cannot apply if you've already settled and the income tax has been paid (or you've agreed time to pay). This is because of s554Z5.

After HMRC first considered s222 in the context of the April 2019 loan charge, they introduced s554Z11G (which gets rid of the s222 if the original loan was a notional payment (or if there was a post-April 2017 waiver) and the PAYE was reimbursed). They did not address (or as far as I remember, comment on) the issue of s222 on the April 2019 loan charge.

It's definitely an issue if your employer is solvent (whether or not it actually pays the PAYE to HMRC by its due date of 22 April 2019). In this situation you need to reimburse the employer for the PAYE by 4 July 2019. If you don't then the amount that you didn't reimburse is taxed via the P11D but there is (unusually) also employee's and employer's NIC on it. Note: it may not be the entire amount in the event that the employer for some random reason also paid you cash on 5 April 2019. Also, if you are in this situation you need to take proper advice as to what "reimburse" means.

If your employer is still around but insolvent and HMRC end up doing a reg 80 determination / reg 81 direction to make you pay the PAYE then you and the employer are going to have to squint at the legislation. Reading it normally will say that the s222 tax is due. But reading it as a penal provision, you will want to have regard to what was said in Chilcott:

Originally posted by Lord Neuberger

31 ... The fact that some might regard the operation of section 144A , according to its terms, as penal merely emphasises that the court should construe it with care and if there is a narrower construction less beneficial to the Revenue, more beneficial to the taxpayer, available then the court should at least seriously consider it and, if appropriate, adopt it.

My guess is that it is 50%:50% whether an FTT will be able to read it in a way that means that no s222 tax would be due if HMRC had done a reg 80/81 and you had paid the tax. Personally, I think HMRC shouldn't try that one on. However, who knows what they will do. The other thing is that it is far from a slam dunk that the FTT will decide in your favour and it will cost you a lot of money and heartache to take it that far (especially if you've been involved in a dodgy scheme to get around the April 2019 loan charge that leaves a sour taste in people's mouths).

**passerby** · 2 April 2019, 16:30

The gifts that keeps giving

**Ltdoptions** · 3 April 2019, 17:18

What if your company is in the hands of the liquidator, but the Insolvency claim includes Reg 80's?

**Iliketax** · 4 April 2019, 05:10

Originally posted by Ltdoptions View Post

What if your company is in the hands of the liquidator, but the Insolvency claim includes Reg 80's?

The company still exists. The company may or may not be solvent. So see above.

The PAYE/NIC obligation for the liquidator is "interesting". But that has nothing to do with s222.

**Ltdoptions** · 4 April 2019, 08:19

Blimey ok, so if / when Reg 81's get passed down to the directors, they're going to get hit with the s222 charge unless they either 'make good' the PAYE to the company by July, or pay it via the settlement process?

S222 ITEPA - final straw?!