A group of taxpayers have lost their appeal at the Upper Tribunal (UT) concerning the availability of PAYE credits that HMRC had denied to them and the jurisdiction of the First-tier Tribunal (FTT) to hear cases concerned with the collection of income tax.

The group of taxpayers were individuals who had used a tax avoidance scheme available to contractors, mainly in the IT sector.  These individuals had contracted with the end users of their services via offshore companies who would then pay them minimum wage (subject to tax and NI contributions) with the remainder of their income, net of fees payable to the scheme operators, being loaned back to them via offshore employee benefit trusts, and purportedly free of income tax and NI contributions.  As users of certain tax avoidance methods, HMRC denied them access to deemed PAYE credits that may have been available to reduce income tax liabilities.

Back in May 2022, the Court of Appeal (CoA) had previously heard a very similar case, that we reported on here, and confirmed that HMRC does indeed have wide ranging powers to deny PAYE credits and that the tax tribunals do not have jurisdiction to hear cases concerning the collection of tax.

The taxpayers invited the UT to find that the CoA had been wrong but the UT dismissed the taxpayers’ appeal find that the CoA had already decided the issues pled by the taxpayers and that to hear the case would be run the same arguments anew.

The decision can be found at: PHILLIP BRIAN HIGGS & OTHERS and THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS [2023] UKUT 00296 (TCC) – GOV.UK (www.gov.uk)

This case highlights the wide-ranging powers HMRC have over PAYE credits and where they determine that notional credits are not available appeal can only be made by way judicial review.

Please contact us if you have any questions over tax avoidance schemes, negotiations with HMRC or notional PAYE credits.  We are experienced with these issues along and can provide experienced advice and assistance.