A property development company (the taxpayer) has lost its appeal at the Court of Appeal (CoA) following similar dismissals at the lower tribunals.

The taxpayer had entered into a disclosable tax avoidance scheme whereby the directors of the company were awarded funds with a requirement to acquire party paid shares in the company.  This meant the payment to the directors wasn’t subject to PAYE and NICs as normal salary or bonuses would be.  HMRC raised a determination under the PAYE Regulations and the taxpayer appealed this determination.

Soon after the lodgement of the appeal to the PAYE determination HMRC issued an accelerated payment notice (APN) to the taxpayer requesting that the disputed tax be paid in advance of the litigation.  As there is no statutory right of appeal to an APN the taxpayer indicated to HMRC that it would raise an objection by way of judicial review, and it duly did.  The taxpayer didn’t pay the tax demanded n the APN and HMRC subsequently issued penalties as they are entitled under the APN regime.

The taxpayer appealed these penalties and both lower tribunals dismissed the taxpayer’s appeals.  The case ended up the CoA and the question before the court was whether a PAYE determination was a ‘disputed tax’ for the purposes of the APN regime.  When employers are liable to deduct income tax and employee national insurance contributions (NICs) they are only acting as a third-party collection mechanism and the employer isn’t a taxpayer in relation to those taxes.

The CoA found that within the PAYE Regulations there is a rule to treat PAYE determinations as if they were assessments for the purposes of certain parts of the Taxes Management Act 1970 that govern the assessment, appeals and penalty provisions for under-assessed taxes.  Therefore, the under-deducted PAYE and NICs were ‘disputed tax’ for the purposes of the APN regime.

It is anticipated that any ground remaining under the judicial review will have been debated and decided by the tribunals and the CoA and the stayed review will likely now not take place and the tax due under the APN payable as it has been.  The appeal to the PAYE determination will be heard in the future if the taxpayer decides to continue the appeal.

The decision can be found at: Sheiling Properties Ltd v Revenue And Customs [2021] EWCA Civ 1425 (05 October 2021) (bailii.org)

Please contact us if you have been issued with a PAYE determination or penalty.  We are experienced with negotiated with HMRC and can help resolve disputes.