Moyes
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 November 2014 |
| Neutral Citation | [2014] UKFTT 1030 (TC) |
| Date | 11 November 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 1030 (TC)
Judge Christopher Staker, Ms Sonia Gable
Ms Rebecca Murray, counsel, appeared for the Appellant
Mr Tony Burke appeared for the Respondents
Procedure - Income tax - Insufficient tax deducted via PAYE - Whether HMRC finding that appellant liable to pay the difference is an "assessment" with a right of appeal to the tribunal - No - Taxes Management Act 1970 ("TMA 1970"), Taxes Management Act 1970 section 31 subsec-or-para 1s. 31(1)(d) - Appeal struck out.
The First-tier Tribunal (FTT) has struck out a taxpayer's appeal against a finding in a letter from HMRC requiring the taxpayer to pay the difference between the amount of tax to which he was liable in accordance with his self assessment tax returns and the amount of PAYE that had been deducted by his employer, finding that it had no jurisdiction as the letter was not an "assessment" for the purposes of TMA 1970, Taxes Management Act 1970 section 31 subsec-or-para 1s. 31(1)(d) and therefore could not be appealed against.
James Moyes (the appellant) became an employee of Collins Stuart Europe Ltd (Collins Stuart) in December 2001. Until June 2005 Collins Stuart operated a BR tax code, resulting in a significant underpayment of tax, as part of the appellant's earnings were taxable at the higher rate. This was only discovered when the appellant appointed a new agent in 2005, at which time the agent submitted the appellant's tax returns for 2002-03 and 2003-04 and requested that the tax code be amended.
The appellant's solicitor took the view that Collins Stuart was liable for the underpayment and not the appellant as Collins Stuart had not exercised due care and the appellant was not aware of the underpayment until he instructed the new agent and therefore Condition A in the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), reg. 72(3) and Condition B in SI 2003/2682, reg. 72(4) were not satisfied. HMRC investigated the underpayment wanting to know why a tax code BR had been used when they had never issued such a code, although they did note that "the correct code of 461L was in operation for 2002-2003". Collins Stuart had no explanation for the use of the tax code BR other than saying that it was company policy to request a P45 or P46 when an employee joined, but that if none was received a BR code would be operated and that it was the responsibility of the employee to check that their payslips and P60 were correct. HMRC took the view that the underpayment was the appellant's fault for not handing in a P45 or completing a P46 and that given this Collins Stuart had acted correctly in using code BR. There then followed more correspondence between the parties and an appeal was made by the appellant to the FTT against the assessments raised by HMRC when they processed his tax returns, on the basis that either Collins Stuart was at fault for not following the correct PAYE procedures or HMRC were at fault because they were in a position to issue the correct tax code (based on their statement that the correct tax code had been used for 2002-03). The appeal was stuck out as Judge Avery Jones found that in the absence of a P45 and P46 Collins Stewart had correctly deducted tax at basic rate as required by SI 2003/2682, reg. 31 and the tax was recoverable from the appellant. The appellant sought to appeal against this decision, but no further appeal was heard. Further correspondence followed, which included a letter from HMRC in November 2011 referring to previous correspondence and also saying that it had been incorrect to state that a code had been issued of 416L for 2002-03 and that this error had been caused by someone misunderstanding an entry on the record.
The appellant appealed against this letter of November 2011 on the ground that the appellant was not liable for the underpayment of tax because under the Taxes Management Act 1970 (TMA 1970), Taxes Management Act 1970 section 59B subsec-or-para 8s. 59B(8) and the PAYE Regulations the amounts ought to have been paid under PAYE by Collins Stuart.
HMRC applied to strike out the appeal on the ground that:
the November 2011 letter did not amount to an appealable decision as it was not an "assessment to tax" for the purposes of TMA 1970, Taxes Management Act 1970 section 31 subsec-or-para 1s. 31(1)(d). The figures had come from the appellant's self-assessment, against which there is no right of appeal and therefore the tribunal did not have jurisdiction to hear the appeal; alternatively
the subject matter of the appeal had already been dealt with in the above mentioned appeal which had been stuck out, so that the matter was res judicata; and in any event
any possible appeal was out of time.
It was common ground between the parties that, unless the November 2011 HMRC letter was an "assessment" for the purposes of TMA 1970, Taxes Management Act 1970 section 31 subsec-or-para 1s. 31(1)(d), there was no appealable decision in this case, and that the tribunal was accordingly without jurisdiction and that was the initial question that the tribunal determined. With reference to the FTT case of PrinceTAX[2012] TC 01852 (in which it was found that a P800 was not an assessment for the purposes of TMA 1970, Taxes Management Act 1970 section 31 subsec-or-para 1s. 31(1)(d)) the FTT considered that a distinction can be drawn between:
(2) a determination of the amount of tax that a taxpayer is liable to pay under substantive provisions of tax legislation (that is to say, a determination of the taxpayer's income, gains, allowances and reliefs, and a calculation of the tax payable based upon that determination) ("substantive determinations") and
(3) a determination of the amount of tax so assessed that remains unpaid, and issues such as whether it is the taxpayer personally, or the taxpayer's employer, who is liable to pay any or all of an outstanding amount of tax assessed ("administrative determinations").
Based on the case law of Bartram v R & C CommrsTAX[2012] BTC 1614 (in which the Upper Tribunal found that a determination under TMA 1970, Taxes Management Act 1970 section 28Cs. 28C is not an "assessment") and Prince the FTT found that not every substantive determination is an "assessment". It also noted that in the FTT case of BartramTAX[2011] TC 01321 (with which the UT agreed) the potential lack of a remedy (other than judicial review proceedings) was not a reason for finding that a substantive determination is an "assessment". In this case the FTT found that the November 2011 letter was not an assessment for the purposes of TMA 1970, Taxes Management Act 1970 section 31 subsec-or-para 1s. 31(1)(d) and therefore there was no valid appeal before the tribunal and the tribunal did not have jurisdiction to deal with the claim made by the appellant.
Although the above conclusion meant that the appeal would be struck out any way, for completeness the FTT also found that the subject matter of the earlier appeal was the same as the subject of this appeal and therefore the matter was res judicata, and in any case there was no justification for a late appeal.
The appeal was accordingly struck out.
This case serves as a reminder that employees should check their payslips and P60s to make sure that the correct tax has been deducted by their employer. The taxpayer in this case would also have benefitted from submitting his tax returns on time as the erroneous tax code could have been rectified sooner, avoiding the accumulation of unpaid tax.
[1]The Appellant seeks to appeal against a finding contained in a letter from HMRC dated 8 November 2011. The finding is that the Appellant is liable to pay the difference between the amount of tax to which he liable in accordance with his self-assessment tax returns as submitted by him for tax years 2002-03 to 2004-05 inclusive, and the amount of tax for those years that was deducted by his employer from his earnings pursuant to the PAYE system. It is common ground that during those tax years the Appellant's employer applied a tax code for the Appellant that resulted in him paying less tax under the PAYE system than the tax to which he was liable in accordance with his self-assessment tax returns.
[2]HMRC dispute the jurisdiction of the Tribunal to hear the appeal, on the basis that there has been no decision by HMRC in respect of which there is a statutory right of appeal to the Tribunal. HMRC also argue in the alternative that the subject matter of this appeal has already been determined by the Tribunal in an earlier appeal, such that the matter is res judicata, and that any possible appeal is in any event out of time.
[3]The principal legislative provisions relied upon by the Appellant are set out in the annex to this decision.
[4]Save in respect of the specific matters referred to below, there was little dispute between the parties in relation to the facts. On the basis of the evidence, the Tribunal makes the following background findings of fact.
[5]In about December 2001, the Appellant, who had previously worked for a different employer, took up employment with Collins Stewart Europe Ltd ("Collins Stewart"). From the time of commencement of the new employment until the end of the 2001-02 tax year, Collins Stewart deducted PAYE tax from the Appellant's pay, operating tax code "BR M1". Thereafter, until June 2005, Collins Stewart operated tax code "BR". From July until September 2005, Collins Stewart operated tax code "489L", and then from October 2005 until the end of the 2005-06 tax year operated tax code "433L".
[6]The effect of tax codes "BR M1" and "BR" was that PAYE tax was deducted from all of the Appellant's earnings at the basic rate. In the case of a taxpayer who is not a higher rate taxpayer, this tax code can result in an overpayment of tax by the employee, since it does not take into account the tax-free personal allowance. In the case of...
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