The First-tier Tribunal has ruled in HMRC’s favour in a case where the taxpayer sought to offset PAYE against partnership scheme losses – Baillie v HMRC  UKFTT 456 (TC).
Although the taxpayer argued that PAYE had been actually paid through his director’s loan account, or that at least the intention was there to do so, the FTT found that this was not correct:
“On the basis of the evidence which we saw and heard we have concluded that, while the PAYE might have appeared as an entry in Mr Baillie’s director’s loan account, there is no evidence that it was actually paid to HMRC. Unfortunately for Mr Baillie, for these purposes, as stated in the McVeigh decision, the mere entry in the accounts of a company is not sufficient to amount to payment. In order to succeed, Mr Baillie needs to show that payment of this amount was actually paid to HMRC and he has not been able to show that.
Equally, any intention by Mr Baillie that the payment should have been made can also not change the fact of whether the payment was actually made.
Finally, we understand Mr Baillie’s protestation that from May 2004 after the freezing order was imposed, he was not able to make any payments, but note, as HMRC pointed out, that by the time that freezing order was imposed, the PAYE payment was already late (the due date for payment was May 2003).”
There were some crumbs of comfort for the taxpayer, in that HMRC agreed to adjust their discovery assessments to remove rental income that had been incorrectly included, and also agreed to allow the offset of some remaining partnership losses.