Directors who know that records contain technical errors should take action. If they do not, the risk of running into directors' liability grows.
This prompted the Gelderland District Court recently confirmed in a case where the tax collector held the directors of a BV personally liable for VAT and payroll tax that the BV was unable to pay.
Payment inability reported
The directors had reported the BV's insolvency in time to the Inland Revenue. As a result, the Tax Office bears the heavy burden of proving that the unpaid tax was caused by the directors' gross negligence. The Inland Revenue succeeds in that proof.
The BV had filed a zero VAT return for the 4th quarter of 2013. Returns for the first 3 quarters were filed from which a VAT refund followed. After the end of 2013, these returns were restored through a supplementary return, on which VAT was payable. The directors' explanation for this course of action was that there were incorrect links in the accounting software.
Declaration pattern
The court also considered that a clear declaration pattern could be recognised. Incorrect period declarations were also made for 2011 and 2012, which were later rectified with supplements. Partly on this basis, the court ruled that the directors were grossly at fault that VAT could not be paid.
However, joint and several liability for VAT does not mean that the directors can also be held personally liable for the unpaid payroll tax. After all, default of payment was reported in time and, with regard to payroll tax, the tax authorities prove the inability to pay is not due to the directors' gross negligence.