Company rejects claim and says payment was his responsibility
A former company director recently filed a claim with the Employment Relations Authority claiming that his employer was responsible for his unpaid taxes.
Allen John Matthews worked as a service manager for Air Concepts Service Limited (ACSL) and also held positions as a shareholder and director in the company. His employment came to an end in October 2018 following the sale of ACSL to new owners.
Matthews encountered a tax issue during his employment with ACSL, claiming that the employer had not correctly handled his income tax payments, leading to unpaid taxes, penalties, and interest owed to the Inland Revenue Department (IRD).
To resolve this, he paid the outstanding tax arrears to the IRD and subsequently sought reimbursement from ACSL and its director, Shaun Pahalad.
While ACSL and Pahalad acknowledged the error in handling Matthews' income tax, they rejected his claim for reimbursement.
Their argument was Matthews, along with his wife, were the ones responsible for ensuring his income tax was paid during his employment.
The worker's history
Matthews' employment with ACSL concluded upon the business's sale to a new owner, and he began working for the new owner following the transaction.
After the sale, ACSL and Pahalad undertook the process of closing the company's business accounts and transitioning clients to the new business owner.
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Subsequently, Matthews formally ceased to be a director in November 2018 and a shareholder in March 2019.
The issue of Matthews' unpaid income tax came to light in October 2019 when the IRD sent him a letter notifying him of $7,029.20 in unpaid income tax relating to his ACSL employment.
The IRD intended to recover this amount by deducting $707.92 from his salary each week. According to records, this was the first instance Matthews became aware of any pending tax arrears.
Following the receipt of the IRD letter, Matthews promptly contacted IRD and established a suitable repayment plan. He also reached out to Pahalad via email, inquiring about the IRD arrears and the status of his tax payments made through ACSL.
Later, Matthews further inquired with the ACSL accountant to confirm the payments made to IRD. He also sent another email to Pahalad, requesting confirmation of the tax payments made by ACSL to IRD for the relevant tax years. No response was received from ACSL or Pahalad.
HRD previously reported about a company director of an Auckland-based firm who was sentenced to two years and three months in jail for not paying their employees' taxes to the IRD.
Who should’ve paid the taxes?
The Authority found that Matthews was not responsible for deducting and paying his tax to the IRD.
"The IRD letter to Matthews states, 'At the time of writing this letter, your account was still overdue by $7,029.20.' This meant previous letters about [his] tax were sent by IRD but not received by [him]," the Authority said.
"It was likely the original letters were sent to an ACSL representative who was responsible for paying Matthews’ income tax to IRD," it added.
"ACSL had the ultimate responsibility for ensuring income tax was deducted from Matthews’ salary and paid to IRD," the Authority said.
"Given ACSL’s failure to pay [his] tax contributed to the imposition of tax penalties and interest, ACSL is also liable for reimbursing these amounts to Matthews," it added. Thus, it ordered the company to reimburse him for the total claimed of almost $15,000.