The taxman has paid almost £2M in compensation after an “unjustified” demand was issued to a company, causing its collapse.

HMRC said it later withdrew the tax demand which resulted in a liquidation order, but by then it was too late. It wasn’t until the company was “wound up” that it was realised by officials that the order was not justified.

After being approved by the Treasury, those behind the company were paid £1.9M by HMRC for “damages suffered”.

The embarrassment for the Revenue follows a tribunal ruling that the tax authority wrongly issued a discovery assessment against a taxpayer who was a limited company director.

The case, Anderson V HMRC, confirms that if HMRC alleges a loss of tax was caused by taxpayer carelessness, the allegation can be rebutted if the taxpayer took professional advice.

Lawyer Adam Craggs, who blogged about the implications of the case from law firm’s RPC website, reflected: “The fact that HMRC may not agree with that advice is irrelevant.”

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