M Jays and another v HMRC

In M Jays and another v HMRC [2022] UKFTT 420 (TC) (22 September 2022) the First-tier Tribunal (FTT) found that dividends credited to a blocked directors’ account which under the terms of an agreement could not be accessed by the directors were not deemed to have been ‘paid’ for the purposes of income tax.

HMRC had issued discovery and penalty assessments to the taxpayers in respect of underpaid income tax on dividends received from the company they wholly owned between them. The situation was unusual in that dividends paid out by the company were subject to an agreement reached with a bank which had provided various loans and financial products to the company. That agreement limited the profits which could be extracted from the company by the taxpayers. Any amounts exceeding that limit would not be paid but would instead be credited to a blocked account and...

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