OCO Ltd; Toughglaze (UK) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 August 2017 |
| Neutral Citation | [2017] UKFTT 603 (TC) |
| Date | 04 August 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
[2017] UKFTT 0603 (TC)
Judge Swami Raghavan
RPC appeared for the appellants
General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Procedure – Whether FTT has power to reconsider decision in principle relating to Income Tax (Pay as You Earn) Regulations 2003 (SI 2003/2682), reg. 80 determinations and Social Security Contributions (Transfer of Functions, etc.) Act 1999, s. 8 decisions applying R v St Marylebone General Commissioners (ex parte Hay) (1986) 57 TC 59 and Larner v Warrington (HMIT) [1985] BTC 382 (cases based on TMA 1970, s. 50, decided prior to inception of current tribunal framework in Tribunals, Courts and Enforcement Act 2007 (TCEA 2007), Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) and Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698)) – Yes – Whether power should be exercised to take account of case law not before the tribunal – No – taking account of provisions for review in current tribunal framework – Application to reconsider refused.
The First-tier Tribunal (FTT) rejected HMRC's application for an earlier FTT decision to be reconsidered, finding that although the FTT had the power to reconsider a decision in principle it was not appropriate in this case because there was already a mandatory review mechanism in the tribunal rules.
In the earlier decision of OCO Ltd; Toughglaze (UK) Ltd [2017] TC 06031, the FTT dismissed the taxpayer-companies' appeals against Income Tax (Pay as You Earn) Regulations 2003 (SI 2003/2682), reg. 80 determinations and Social Security Contributions (Transfer of Functions, etc.) Act 1999, s. 8 notices in respect of unpaid PAYE tax and National Insurance contributions (NICs) in relation to the companies use of a scheme involving an employee benefit trust (EBT). The decision was in principle on the basis that if the parties could not settle the amounts of PAYE and NICs due they could revert to the tribunal. The FTT found that, applying the Ramsay principle, the appointment of funds to sub-trusts was in effect a payment to the relevant director of earnings for the purposes of PAYE and NICs. The FTT rejected HMRC's alternative contentions that (1) there had been a redirection of earnings (“the redirection argument”) and (2) the discretionary employee benefit trusts were bare trusts (“the Antoniades/Autoclenz argument”).
This decision dealt with HMRC's subsequent application to the FTT for it to reconsider its decision in principle on the redirection issue in the light of the Supreme Court's decision in RFC 2012 plc (in liquidation) (formerly Rangers Football Club plc) v Advocate General for Scotland [2017] BTC 22. The FTT's decision had not taken account of the Supreme Court decision, which although published four days after the FTT's decision was released had been released to the parties three days before the FTT decision.
HMRC's application raised the questions of whether:
- the FTT had the power to reconsider a decision it had made in principle in relation to PAYE and NICs liabilities after the decision had been issued to the parties; and
- if it did whether in this case the decision in principle should be reconsidered.
The FTT found that the cases of R v St Marylebone General Commissioners (ex parte Hay) (1986) 57 TC 59 and Larner v Warrington (HMIT) [1985] BTC 382 clearly supported the proposition that the General Commissioners had the power to reconsider a decision which had been made in principle where the amount of the assessment had not been finally determined. It then looked at the reasoning underpinning that conclusion and found that it was based on TMA 1970, s. 50, which permitted the assessment to be reduced, increased or otherwise “stand good”. It also found that those provisions still applied, and applied to appeals made in respect of the relevant PAYE regulations and NICs decisions. So, while it was now the FTT and the Upper Tribunal (UT) (and no longer the General and Special Commissioners) that heard appeals in relation to assessments, reg. 80 determinations and s. 8 decisions, there was nothing in Hay or Larner which tied the question of a tribunal's jurisdiction to reopen an issue of principle to the particular rules and framework governing decision making by the General and Special Commissioners. The FTT accordingly concluded that the FTT did have the power to reconsider its decision in principle.
However, the FTT decided that in this case it should not use its discretion to reconsider its decision as strong reasons had not been demonstrated for such a reconsideration. It found that the framework of rules provided in respect of the tribunals, and in particular the Tribunals, Courts and Enforcement Act 2007 (TCEA 2007), s. 9 and the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 41 provided the FTT with the ability to review a decision upon an application for permission to appeal, which provided a mandatory review mechanism. And there was specific provision for revising a decision, if the tribunal was satisfied there was an error of law in the decision.
HMRC's application was therefore refused.
HMRC contended that there was an error of law in the FTT's earlier decision of OCO Ltd; Toughglaze (UK) Ltd [2017] TC 06031, because it did not take into account the Supreme Court's judgment in the Rangers EBT case on the issue of redirection, and the decision in principle should therefore be reconsidered. Although the error would not have changed the FTT's decision, which upheld HMRC's PAYE determinations and NIC decisions, HMRC suggested that a reconsideration was likely to be of assistance to both parties in deciding how to proceed and to the UT should the appeals go any further.
The FTT found that although it had the power to reconsider the decision, it should not do so in this case because there had not been strong reasons shown for doing so. In particular the tribunal rules provided that the FTT could review a decision if it was satisfied there was an error of law in the decision.
[1] This decision concerns an application from HMRC to the First-tier Tribunal (FTT) for the tribunal to reconsider a decision in principle which it issued to the parties on 1 July 20171. The application raises contested issues as to whether 1) the FTT has power to reconsider a decision it has made in principle in relation to PAYE and National Insurance Contributions (NICs) liabilities after the decision was issued to the parties and 2) if it does whether the decision in principle should be reconsidered. In order to put HMRC's application in context it is necessary to briefly outline the issues raised in the substantive appeals.
[2] The substantive appeals dealt with appeals against PAYE regulation 80 determinations2 in respect of underpaid PAYE, and “s8 decisions” (under the relevant NICs legislation3 in relation to underpaid NICs arising from the appellant's use of a scheme. The arrangements involved the setting up an employee benefit trust (EBT), and the subsequent creation of sub-funds for the benefit of particular employees and their families. Benefits were provided to the employees and their families mainly by the trustees advancing interest free loans to the employees. In summary HMRC invited the tribunal to uphold the determinations and decisions...
To continue reading
Request your trial