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HMRC internal manual

Employment Income Manual

Director's undrawn remuneration lost in company's liquidation: adjustment of employment income: handling points

For details of possible adjustments to employment income when director’s undrawn remuneration is lost in a company’s liquidation see EIM42735.

This page tells you how to handle such a case in practice. If a request to reduce the chargeable earnings is received, this should be referred, with the director’s file, to the Inspector who deals with the company’s accounts. He or she will be responsible for deciding whether or not the conditions are satisfied.

Where the conditions appear to be satisfied, the Inspector should obtain a copy of the director’s account with the company to which the lost remuneration was credited and examine this to ensure that what has been lost is in fact undrawn remuneration and not, for example, funds loaned to the company by the director. Unless there is firm evidence to the contrary it should be argued that amounts drawn from the director’s account in the relevant years are primarily remuneration rather than recoveries of capital introduced.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)