PA Holdings Ltd v R & C Commissioners
| Jurisdiction | England & Wales |
| Judgment Date | 29 August 2008 |
| Date | 29 August 2008 |
| Court | Special Commissioners (UK) |
special commissioners decision
Theodore Wallace
Stephen Brandon QC and Rory Mullan, instructed by Speechly Bircham LLP, for the Appellant
Malcolm Gammie QC, instructed by the Solicitor for the Respondents
A special commissioner directed that appeals against separate decisions that certain sums paid to employees of the taxpayer were emoluments of their employment liable to income tax under PAYE and earnings on which the taxpayer was liable to pay Class 1 NICs should be heard together where there was no substantial risk of prejudice to the taxpayer.
The Revenue issued separate decisions that certain sums paid to employees of the taxpayer company in the three years to April 2003 were emoluments liable to income tax under PAYE and earnings on which the taxpayer was liable to pay Class 1 NICs. The payments were part of a scheme to secure payment of annual bonuses to employees free of PAYE and National Insurance liabilities. The Revenue had issued notices relating to the NICs under Social Security Contributions (Transfer of Functions, etc) Act 1999 section 8s. 8 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 and made determinations under reg. 80 of the Income Tax (Pay as You Earn) Regulations 2003. The taxpayer appealed contending that the payments were dividends to be taxed under Sch. F and not emoluments or earnings. Other appeals were pending in connection with the same scheme.
A procedural error occurred in relation to the contributions appeal because when the Revenue referred the appeals to the special commissioners, although they showed the taxpayer (Holdings) as the appellant they enclosed s. 8 notices issued to PA Consulting Services Ltd rather than the notices issued to Holdings. A non-statutory Form 209B was submitted by the Revenue accompanied by agreed directions.
The Revenue then served a statement of case which covered both the reg. 80 determinations and the s. 8 notices issued to the taxpayer and stated that the issue was whether cash payments there described and made to employees of the taxpayer represented emoluments for Income and Corporation Taxes Act 1988 section 19ICTA 1988, s. 19 paid or treated as paid by the taxpayer, and earnings for National Insurance in respect of which the taxpayer was liable as secondary contributor. The taxpayer contended that the question for determination was only whether the income constituted dividends, so that the contributions issue was excluded. A preliminary hearing was then fixed for directions.
Whether the appeal covered both the reg. 80 and the NIC decisions.
The special commissioner (Theodore Wallace) made a direction that the appeal included the decision in respect of NICs.
The Form 209B sent by the Revenue as a matter of practice was not a statutory form. As a matter of fact the form did refer to the appeal of Holdings against the s. 8 decisions for the years 2000-01 to 2002-03. Although the Revenue failed to enclose the relevant decision, enclosing instead decisions in relation to PA Consulting Services Ltd, the details of the proceedings in the form covered the subject matter of the decision against which Holdings had appealed. The question for determination covered National Insurance as well as PAYE.
It was quite clear from the statement of case settled by counsel that the Revenue considered that the appeal before the special commissioners covered the contributions decision.
Regulation 3(2) of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 required the clerk to the special commissioners, on receipt of a notice under reg. 3(1) to fix a hearing date, on being satisfied of certain matters including sufficient particulars of the proceedings, to issue a hearing notice. The implication was that before issuing a substantive hearing notice the clerk should have received a notice under reg. 3(1) with sufficient information to satisfy him as to the matters in reg. 3(2).
The notice under reg. 3(1) in the present case encompassed all the material sent to the clerk including the decisions, notices of appeal and the draft direction. In respect of the contributions appeal those were contradictory. However a subsequent letter indicating that, if the question as to National Insurance contributions was not before the special commissioners for determination, then HM Revenue and Customs would wish to apply for that question to be determined at the same time in respect of the decision appealed, did constitute notice under reg. 3. The result was that from receipt of that letter the appeal by Holdings in respect of the contributions was clearly before the special commissioners.
It was appropriate for the appeals to be heard together within reg. 7 of the 1994 Regulations. The factual contentions by the Revenue in the statement of case applied equally to both income tax and insurance contributions. Although the taxpayer said that more documents would be needed in respect of insurance contributions, it was difficult to see how there would be any substantial addition to the documents otherwise necessary.
There was a clear benefit in both the PAYE and insurance contribution proceedings being heard by the same tribunal at the same time.
The taxpayer had had ample time to consider what material to put forward in support of the contention that it would be prejudiced by the proceedings being heard together. The only concrete matter advanced was the need to consider the insurance legislation. It was not suggested that there was any difference in the present context between emoluments and earnings. The taxpayer failed to show any substantial risk of prejudice.
1. This decision contains my reasons for the direction released on 6 August 2008 following a hearing on 4 August, the direction being:
That the question for determination and the appeal listed for November 2008 shall include the decision in respect of National Insurance Contributions.
2. The Respondents ("the Revenue") have issued separate decisions that certain sums paid to employees of Holdings in the three years to April 2003 were emoluments liable to income tax under PAYE and earnings on which Holdings is liable to pay Class I National Insurance Contributions. The Appellant ("Holdings") has appealed.
3. A hearing is listed for 10 days starting on 17 November 2008. The hearing was notified on 16 May 2008 for:
Appeals against 3 section 8 Notices of Decision Dated 31/8/05
Each notice covering the period 6 April 2000 to 5 April 2003 inc.
Appeals against Regulation 80 Determination Dated 31/8/05
Years - 2000/01 - 2001/02 - 2002/03
The section 8 notices related to the insurance contributions being under Social Security Contributions (Transfer of Functions, etc) Act 1999 section 8section 8 of the Social Security Contributions (Transfer of Functions, etc) Act 1999. The regulation 80 determinations were under the Income Tax (Pay as You Earn) Regulations 2003.
4. The reference in the hearing notice to section 8 notices dated 31/8/05 was incorrect because the notices issued on that date were to PA Consulting Services Ltd and not to Holdings. The section 8 notices to Holdings were dated 28 March 2007 and are also under appeal; the effect of the notices was that Holdings was liable to pay a further £7,862,751 in contributions.
5. The regulation 80 determination against Holdings was dated 31 August 2005, so that part of the hearing notice was correct.
6. The error in relation to the contributions appeal arose because when the Revenue referred the appeals to the Special Commissioners on 8 June 2007, although they showed Holdings as the Appellant they enclosed the 2005 section 8 notices to PA Consulting Services Ltd rather than the notices issued to Holdings on 27 March 2007.
7. The reference on Form 209B, which is a non-statutory form used by the Revenue, gave the details of the proceedings as:
Appeal against Regulation 80 Determination and section 8 decisions for tax years 2000/01, 2001/02 and 2002/03.
It gave the appellant as Holdings and the questions for determination as,
Whether income from the award of shares in Ellastone Restricted Share Plan is subject to PAYE tax and...
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