The special commissioners had no jurisdiction to hear an appeal from a disputed decision concerning the use of employers’ PAYE references since their jurisdiction was statutory and TMA 1970, s. 31, which dealt with appeals, gave no right of appeal to the special commissioners from a decision relating to care and management.

Facts

The taxpayer provided an administrative and financial outsourcing service for its clients who were other businesses and agencies. In particular it paid earnings to workers who were employed by its clients. The taxpayer accepted that the workers were employed by the clients of the taxpayer and that the taxpayer was not the employer of the workers for employment law purposes. It was also common ground that the earnings were emoluments. In respect of the earnings which were paid to the workers the taxpayer accounted for PAYE to the Revenue but used its own employer's PAYE reference and not the employers’ PAYE references of each of its clients.

The taxpayer had advised the Revenue that there had been underpayments of PAYE due to the Revenue for the year 2005–2006 in an amount in excess of £350,000. The taxpayer appealed against a decision of the Revenue asking the taxpayer, as agent, to implement simple changes to their processes which would make the audit trail clearer for the future, since difficulties had been experienced in identifying and confirming the PAYE audit trail for both the current year and previous years.

The taxpayer's main reason for appealing against the disputed decision was because it was of the view that it was entitled to operate the PAYE system in the way that it had done. However, it also argued that the disputed decision implied that the Revenue had decided that the taxpayer could not account for PAYE as an intermediary under s. 687(2) of the Income Tax (Earnings and Pensions) Act 2003 or as an ‘other payer’ within the meaning of reg. 12(1)(a) of the Income Tax (Pay As You Earn) Regulations 2003 and, in the taxpayer's view, the Revenue had been wrong to reach those implied decisions.

The Revenue were of the view that they were entitled to ask the taxpayer, when accounting for PAYE in respect of earnings paid to workers of other employers, to use the employers’ PAYE references of those other employers rather than its own employer's PAYE reference. The Revenue had to identify the actual employer because it was the liability of the employer to account for the tax and for mistakes and underpayments. The Revenue did not accept that the disputed decision implied that the taxpayer could not account for PAYE as an intermediary or as an ‘other payer’ but argued that, even if those decisions were implied, an intermediary was not an employer and ‘other payers’ had to operate PAYE in the same way as employers.

Issue

Whether the special commissioners had jurisdiction to hear an appeal from the disputed decision.

Decision

The special commissioner (Dr Nuala Brice) (dismissing the appeal) said that the special commissioners were a statutory tribunal and the jurisdiction was statutory so that the special commissioners had no inherent jurisdiction and might only exercise the jurisdiction given to them by specific statutory provision. The disputed decision was made under the care and management powers given to the Revenue by s. 1(1) of TMA 1970. Section 31 of the Act contained the provisions about appeals and there was nothing in s. 31 giving the right of appeal to the special commissioners from a decision relating to care and management.

Section 31(1)(d) was not wide enough to include an assessment of a state of affairs. The phrase used in s. 31(1)(d) was ‘any assessment to tax’ and the disputed decision was not an assessment to tax. The authorities relied upon by the taxpayer were not of assistance. In the case of Vickerman v Mason's Personal Representatives [1984] BTC 119, the issue was whether an arithmetical error in an assessment could be corrected by a further assessment. In the original assessment the amount of income which was liable to tax was correctly stated but the rates of tax had been incorrectly applied with the result that the amount of tax was understated. It was argued that the phrase ‘assessment to tax’ referred to the assessment of the amount liable to tax and, as that was correct, there could be no further assessment. That argument was not accepted and Scott J held that the expression ‘assessment to tax’ covered all the various stages leading up to the calculation and statement of the amount of tax due. Therefore Vickerman was authority for the principle that the words ‘assessment to tax’ included the statement of the amount of tax due but was not authority for the view that the words had any wider meaning or that they could mean an assessment of a state of affairs.

Bootle v Bye (1995) Sp C 61 concerned an appeal against assessments to income tax under Sch. E and one issue was whether an employee was liable to account for tax which the employer should have deducted. That in turn gave rise to the question whether the special commissioners had jurisdiction to consider that issue. The special commissioners held that the phrase ‘assessment to tax’ in s. 31(1)(d) meant assessment of the tax actually payable and so there was jurisdiction to consider the liability of the taxpayers to account for tax which should have been deducted from the payments. So Bootle v Bye was authority for the principle that the phrase assessment to tax meant assessment of the amount of tax actually payable but was not authority for the view that the words had any wider meaning or that they could mean an assessment of a state of affairs.

The taxpayer had argued that the disputed decision in this appeal could be an assessment because it concerned the liability of the taxpayer to account for PAYE in the future. However, the disputed decision did not seek to alter the fact that the taxpayer paid the tax to the Revenue; all it did was to require the payments to be accompanied by the employers’ PAYE references of the taxpayer's clients. Accordingly, s. 31(1)(d) did not give the special commissioners jurisdiction to consider an appeal against the disputed decision.

Moreover, there appeared to be no other provisions giving the right of appeal to the special commissioners. Section 684(2), (8) and (9) of the 2003 Act provided for regulations to include provisions for rights of appeal and reg. 80 of the 2003 regulations contained such provision. However, the disputed decision was not a determination of an amount of tax and so reg. 80 did not confer jurisdiction. Any argument that the Revenue had erred in failing to make regulations was not one which could be considered by the special commissioners.

Both parties had asked the commissioner to express a view as to whether the special commissioners had jurisdiction to hear an appeal from the decisions which the taxpayer claimed were implied in the disputed decision, namely that the taxpayer could not account for PAYE as an intermediary under s. 687(2) of the 2003 Act or as an ‘other payer’ within the meaning of reg. 12(1)(a) of the 2003 Regulations. However, the disputed decision did not imply the further decisions claimed by the taxpayer; and, even if it did, the same statutory provisions about jurisdiction applied and there was no provision which gave the special commissioners jurisdiction to hear an appeal about the decisions which were claimed to be implied.

(2007) Sp C 641.
Decision released11 October 2007.