Credit Suisse Securities (Europe) Ltd and Others
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 February 2020 |
| Neutral Citation | [2020] UKFTT 86 (TC) |
| Date | 11 February 2020 |
| Court | First Tier Tribunal (Tax Chamber) |
[2020] UKFTT 86 (TC)
Judge Guy Brannan
Kevin Prosser QC and David Yates QC, instructed by Slaughter and May, appeared for the appellant
Akash Nawbatt QC and Kate Balmer, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Bankers payroll tax – Whether HMRC gave notice of their intention to enquire into appellants' return under FA 2010, Sch. 1, para. 23 – No – Whether remuneration provided pursuant to arrangements under FA 2010, Sch. 1, para. 12 – Yes – Appeal allowed.
The First-tier Tribunal (FTT) allowed a group of companies' appeals against closure notices amending their consolidated bank payroll tax (BPT) return because HMRC had not given a valid notice of enquiry into the return. Had it been required to do so, the FTT would have held that the provision of a deferred variable award to senior employees was chargeable to BPT.
Four members of the Credit Suisse group (collectively, “CS”) had submitted a consolidated BPT return on 31 August 2010 as required under legislation in FA 2010, Sch. 1. In January 2017 HMRC issued closure notices amending the return, which CS appealed.
Given that BPT was a new tax, prior to the submission of the BPT return CS had had discussions with HMRC concerning the application of BPT. In particular there were discussions about the treatment of the provision of a deferred variable award to senior employees called the Adjustable Performance Plan Award (APPA). Those discussions continued after CS filed its BPT return excluding the APPA. While the discussions were ongoing there was a change of HMRC officer dealing with the case. The new officer assumed that a notice of enquiry had been issued, but as it had not, and the FTT found that none of the correspondence or meetings constituted such a notice, the informal discussions continued until the expiry of the period in which a notice of enquiry could be delivered (31 August 2011). In considering whether an enquiry notice had been given Judge Guy Brannan drew heavily from the Court of Appeal's decision in R & C Commrs v Raftopoulou [2018] BTC 17.
Given that a notice of enquiry had not been issued by 31 August 2011 HMRC had no statutory power to amend the BPT return and therefore the closure notices were invalid, and the appeal had to be allowed.
Had it been necessary for the FTT to consider whether the APPA was chargeable to BPT, it would have found that it was, under FA 2010, Sch. 1, para. 12. Judge Brannan found that the provisions of para. 12(1)(a)–(c) focused on the individual employee, and on this approach, “arrangements” were entered into between CS and the individual employees when employees were provided with employee-specific compensation sheets. Judge Brannan accepted that it may seem to be a paradox, that the provisions of the APPA fell outside FA 2010, Sch. 1, para. 6 by virtue of the specific exemption yet still fell within para. 12. Nonetheless, he found that para. 12 was intended to be widely construed and he saw no reason to artificially constrict its meaning and in any event para. 12 comprehended non-contractual arrangements.
The appeals were allowed.
There is no prescribed form for an enquiry notice and it does not have to be in writing. However, it does have to be clearly understood by a reasonable person in the recipient's position that HMRC intends to enquire into the return in question and there does have to be some level of formality, both of which were lacking in this case.
The decision provides a useful list of ten propositions concerning enquiry notices which the judge applied based on the Court of Appeal's decision in R & C Commrs v Raftopoulou [2018] BTC 17.
[1] The appellants (collectively “CS”) are all companies within the Credit Suisse Group. CS appeals against closure notices dated 19 January 2017. These closure notices, issued by the Respondents (“HMRC”), amended CS's consolidated bank payroll tax (“BPT”) return, increasing the tax payable by £83,144,379. CS paid this amount on 31 August 2010.
[2] By way of background BPT was a one-off tax imposed by Schedule 1 to the Finance Act 2010 (“FA 2010”). BPT was charged at the rate of 50% on “relevant remuneration” in excess of £25,000 awarded to or in respect of “relevant banking employees” of “taxable companies” during the “chargeable period”. The tax was announced by the Chancellor of the Exchequer on 9 December 2009.
[3] The present appeals are concerned with the application of BPT to the provision by CS to its senior employees of a deferred variable award called the Adjustable Performance Plan Award (“APPA”), awarded for 2009, and granted under the Credit Suisse AG Master Share Plan.
[4] Both parties accept that CS is a “taxable company” and that the remuneration which CS awarded to employees pursuant to the APPA is “relevant remuneration” awarded to “relevant banking employees”, within the meaning of the relevant provisions of Schedule 1 to FA 2010. It is also common ground that there was no tax avoidance purpose behind the introduction of the APPA – in fact it was formulated before the announcement of BPT.
[5] There are two issues in dispute in these appeals: a procedural issue and a substantive issue.
[6] The first issue (“the procedural issue”) is whether HMRC gave notice of their intention to enquire into CS's BPT return on or before 31 August 2011. If HMRC did not give such a notice then HMRC had no statutory power to amend CS's BPT return by giving closure notices. If CS is successful on the procedural issue then it was common ground that the appeals must be allowed, regardless of the outcome on second issue relating to the substantive liability to BPT.
[7] The second issue (“the substantive issue”) is whether the remuneration awarded pursuant to the APPA was “awarded during the chargeable period” either under paragraph 6 or under arrangements within paragraph 12 of Schedule 1 to FA 2010. The expression “the chargeable period” is defined by paragraph 8 of Schedule 1 to FA 2010 to mean the period beginning at 12:30 p.m. on 9 December 2009 and ending on 5 April 2010. On 31 August 2010, CS filed a consolidated BPT return and paid £238,799,581.00 of BPT to HMRC in respect of relevant remuneration awarded during the chargeable period.
[8] On 19 January 2017, HMRC issued CS with four closure notices in respect of the liability to BPT of an employee incentive and retention scheme, i.e. the APPA).
[9] On 17 February 2017, notices of appeal were sent to HMRC by CS, in which a request for an independent review was made. HMRC's independent reviewer provided review conclusion letters on 3 July 2017, which upheld HMRC's decision to issue the four closure notices. CS filed notices of appeal with the First-tier Tribunal (Tax Chamber) on 26 July 2017.
[10] References to paragraphs of statutory provisions are references to paragraphs of Schedule 1 to FA 2010, unless otherwise expressly stated.
[11] In relation to the procedural issue, the main relevant statutory provisions are to found in paragraph 23 which relevantly provides:
(1) HMRC may enquire into a bank payroll tax return if they give notice to the taxable company of their intention to do so within the time allowed.
(2) If the return was delivered on or before 31 August 2010, notice of enquiry may be given at any time on or before 31 August 2011.
(3) If the return was delivered after 31 August 2010, notice of enquiry may be given at any time up to and including whichever of 31 January, 30 April, 31 July or 31 October next follows the first anniversary of the day on which the return was delivered.
(4) An enquiry extends to anything contained in the return or required to be contained in the return.
(5) The following provisions of Schedule 18 to FA 1998 apply to an enquiry into a bank payroll tax return under this Schedule as they apply to an enquiry into a company tax return under that Schedule–
- paragraph 24(4) to (5) (notice of enquiry)
- paragraph 25(2) (enquiry following amendment by company) (but as if the reference there to paragraph 24(2) or (3) were to sub-paragraph (2) or (3) of this paragraph),
- paragraph 31 (amendment of return by company during enquiry),
- paragraphs 31A to 31D (referral of questions to the tribunal during enquiry),
- paragraph 32(1) (completion of enquiry),
- paragraph 33 (direction to complete enquiry), and
- paragraph 34 (amendment of return after enquiry).
[12] As to the question whether a notice of enquiry has to be in writing, the parties relied on paragraph 28 which relevantly provides:
(1) If a discovery assessment is made with respect to a taxable company, the company may appeal against it.
(2) Notice of appeal must be given–
- in writing,
- within the period of 30 days beginning with the date on which notice of the assessment was given, and
- to the officer of Revenue and Customs by whom notice of the assessment was given.
(3) Any objection to a discovery assessment on the ground that paragraph 25, 26 or 27 was not complied with can only be made on an appeal against the assessment under this paragraph.
[13] Paragraph 40 applies certain provisions of the Taxes Management Act 1970, as follows:
(1) The following provisions of TMA 1970 apply for the purposes of bank payroll tax and this Schedule as they apply for the purposes of corporation tax and the Taxes Acts–
- section 108 (responsibility of company officers),
- section 112 (loss, destruction or damage to assessments, returns etc.),
- section 114 (want of form), and
- section 115 (delivery and service of documents).
(2) The application of section 115 of TMA 1970 in relation to the delivery of bank payroll tax returns is subject to any requirements published under paragraph 19(1) of this Schedule.
[14] Paragraph 23(5) applies certain of the collection mechanisms relating to corporation tax contained in Schedule 18 Finance Act 1998...
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