[2011] UKFTT 302 (TC)

TC01164   

Appeal number: TC/2010/09430

PAYE underpayment - elderly unrepresented taxpayer - HMRC awarding two personal allowances - HMRC seeking to collect underpayment via calculation notice - whether calculation notice an “assessment” giving the taxpayer a right of appeal - HMRC application to strike out taxpayer’s appeal - Extra-statutory Concession A19 - HMRC refusal to apply -  part of underpayment relating to DWP failure to operate coding notice - whether HMRC can collect underpayment via coding out - threshold for striking out not met - decision to refuse strike out application - direction for oral hearing with submissions on the meaning of “assessment”, taxpayer appeal rights and the Tribunal’s jurisdiction 

FIRST-TIER TRIBUNAL

TAX 

	ROBERT E CLARK	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: ANNE REDSTON (PRESIDING MEMBER)

The Tribunal considered the submissions in this appeal on 18 April 2011 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 8 December 2010 and HMRC’s Statement of Case submitted on 22 February 2011

© CROWN COPYRIGHT 2011

 DECISION

1.	Mr Clark is an elderly taxpayer who took early retirement from the Post Office in December 2009. All his income is within the scope of PAYE. In November 2010, HMRC told him by way of a Tax Calculation Notice that £806.60 of his 2009-10 tax had been under-collected. 
2.	Mr Clark appealed to the Tribunal. HMRC say that he has no right of appeal against a Calculation Notice, and ask the Tribunal to strike out his appeal.
3.	HMRC have also considered the application of Extra-statutory Concession (“ESC”) A19. By this concession HMRC remit PAYE tax which is formally due, if certain conditions are met. In HMRC’s view, Mr Clark fell outside the scope of the concession. HMRC say that their refusal to apply the ESC is not an appealable decision.
Summary
4.	This is a long and sometimes complicated decision, and I summarise here, largely for Mr Clark’s benefit, why it does not finally dispose of the issue. 
5.	HMRC have asked the Tribunal not to hear Mr Clark’s case, but instead to strike it out under Rule 8(2) of the Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009. I have thus considered, on the basis of the papers submitted, whether to accept their application. 
6.	For a case to be struck out, it must be “plain and obvious” it will not succeed. For the reasons set out below, Mr Clark may well have a right of appeal against the Tax Calculation notice. Assuming he has such a right, his complaints are essentially ones of public law. Sales J in Oxfam v HMRC [2009] EWHC 3078 (Ch) at [68] has said that the Tribunal may be empowered to consider such issues, at least in some situations. I thus find that is thus not “plain and obvious” that Mr Clark’s appeal will fail, and so I have dismissed HMRC’s application for it to be struck out. 
7.	I have not, however, gone on to decide the issues themselves. Although Mr Clark may well consider his case to be straightforward, it actually raises important and fundamental questions which should not be decided on the basis of papers sent to the Tribunal. They need more consideration. 
8.	If HMRC have not otherwise settled the case with Mr Clark before 7 June 2011, I have thus directed that the case be listed for a public hearing. Detailed directions are given at the end of this decision. 
9.	Mr Clark currently does not have a lawyer or an accountant to assist him. At the end of this decision I have included some information about where he might find some help, although he is of course free to come to the Tribunal and put forward his case on his own.
10.	Mr Clark could of course seek, either in parallel with these proceedings or instead of them, to take a judicial review claim to the High Court. 
The test for striking out
11.	It is well settled that striking out is to be used sparingly, and only in plain and obvious cases (Lawrance v Lord Norreys (1890) 15 App Cas 210). This principle was reiterated by the House of Lords in Three Rivers District Council and Others v Governor and Company of the Bank of England (No 3) 2003 2 AC1. The reason for this is clear: striking out deprives the party of his right to be heard. 
12.	Before considering whether this threshold is met, I first set out the evidence, the facts, and the law relating to the points on which Mr Clark is seeking to appeal. 
The evidence
13.	The Tribunal was provided with the correspondence between the parties, and Mr Clark also provided copies of fourteen coding notices and his Tax Calculation Notice issued on 24 November 2010. 
The facts
14.	Mr Clark is 64. In December 2010 he took early retirement from his job with the Post Office for medical reasons. He contacted HMRC to notify them of his retirement. He was already in receipt of an army pension from the Ministry of Defence (“MoD”).
15.	Once Mr Clark retired, he began to receive a further pension from Legal and General (“L&G”); he also received Employment Support Allowance (“ESA”) from the Department of Work and Pensions (“DWP”). As a result he had four sources of income in 2009-10, all within the scope of PAYE. 
16.	Mr Clark says, and I accept, that he contacted HMRC four or five times during the first three months of 2010. He gives more detail about these calls as follows:
“Over a period of three months, from January 2010 to March 2010, I was in contact with [HMRC] on numerous occasions to ensure I was being taxed at the correct rate on my pensions and Employment Support Allowance. Having three separate pensions, I was covered by three separate tax offices, but did not feel the need to notify them all separately as I felt they would all have access to the same information.”
17.	Mr Clark received fourteen separate notices of coding in the period from 17 January 2010 to 22 March 2010. Of these, three relate to 2009-10 and the rest to 2010-11. In addition, he received a Tax Calculation Notice dated 24 November 2010, in respect of the tax year 2009-10. I deal first with the notices which relate to 2009-10, and then those which relate to 2010-11.
Coding notices for 2009-10
18.	Two notices were dated 17 January 2010. One was from HMRC Edinburgh, saying that his new code for 2009-10 was 646L, that it had been sent to L&G and was calculated as follows:
		£	
Personal allowance	6,475	
Job expenses	90	
Retirement annuity payments	1,040	
		
Employment Support Allowance	(1,143)	
	6,462	

19.	It also says “We have worked out your tax code but need you to check that our information about you is correct.” All the coding notices have the same or very similar wording.
20.	 It concluded by saying, in bold “if we have got this wrong, or if your circumstances have changed, and you think it could affect the tax you pay, please tell us.” This message is on all coding notices ending in “L” but not on other notices.
21.	The second notice, also issued on 17 January, was from Cardiff. It told Mr Clark that his tax code was BR, and this was being sent to DWP ESA, so he would pay 20% tax on his ESA. 
22.	On 27 January, ten days later, Mr Clark received four coding notices, one of which related to 2009/10. This was from HMRC Edinburgh. It increased the figure for Mr Clark’s retirement annuity payment by £60. His new code was £652L.
The Tax Calculation Notice
23.	On 24 November 2010 Mr Clark received a two page document headed “Tax Calculation”. This type of document is commonly known as a “P800” by virtue of its stationery reference. 
24.	The first page says:
	“I have reviewed your income tax liability for the year shown above to see whether you have underpaid or overpaid tax for that year. My calculation is given on the enclosed sheet. The calculation result is given near the foot of that page…the underpayment will be collected through your tax code during 2011. The reason for the underpayment is set out on the enclosed sheet.”
25.	The second page is the calculation. It shows two sources of income, one entitled “PAYE income” and the other “Employment and Support Allowance”. £2089.20 has been deducted from the PAYE income, and nothing from the ESA. A retirement annuity payment of £1,100 and job expenses of £90 were both allowed against the total income. 
26.	At the foot of the page “the result” shows tax underpaid of £806.60. The “result” is described as: “this is either what you have to pay, or what we owe you.”
27.	As soon as Mr Clark received this notice, he called HMRC and was told that they had allowed him the benefit of two personal tax allowances by mistake. HMRC do not dispute this. 
28.	For 2009-10 the personal allowance was £6,475. Had Mr Clark had the full “benefit” of the double allowance, he would have an overpayment of £1,295. In fact, his overpayment is £806.20, so only part of the “benefit” of the second personal allowance was received by him. 
Coding Notices for 2010-11 issued on 27 January
29.	The coding notices for 2010-11 are not relevant to the assessment of Mr Clark’s liability for 2009-10, but may be material to his understanding (or otherwise) of his position, and I therefore set them out here.
30.	On 27 January, as noted above, HMRC sent him four further coding notices. Three of these related to 2010-11. 
31.	One was from Edinburgh. This excluded his annuity payment, so it contained only the job expenses and the ESA amount. The code was given as 542L. 
32.	Two were from HMRC Cardiff: 
(1)	one saying that BR would be applied to his ESA ; and
(2)	the other, that BR would be applied to his MoD army pension.
Coding notices for 2010-11 issued on 28 February 2010
33.	A month later, three further 2010-11 coding notices were issued. One was from HMRC Edinburgh, removing £4,835 of his personal allowance. A note at the bottom of the coding notice says “we have set £4,835 of your tax free amount against your other earnings or pensions.” This coding notice was calculated without reference to either the retirement annuity payment or the job expenses. His new code was given as 164L.
34.	Two were from HMRC Cardiff:
(1)	one allocating £3,692 against his MoD army pension, so that coding notice 369T was sent to the MoD; 
(2)	one allocating £1,143 against his ESA, so that coding notice 114T was sent to the DWP. 
35.	The two amounts total £4,835, so reconcile to the amount removed from the L&G coding notice on the same day by HMRC Edinburgh.
Coding notices for 2010-11 dated 10 March 2010
36.	Ten days later, Mr Clark received two more coding notices. One was from HMRC Edinburgh, and it is a duplicate of that issued on 28 February.
37.	Two were from HMRC Cardiff:
(1)	One allocated £3,224 of Mr Clark’s tax allowance against his ESA, so coding notice 322T was sent to the DWP; 
(2)	One allocated £1,611 of his allowance against his MoD army pension, so coding notice 161T was sent to the MoD.
38.	These two amounts again total £4,835, so they equal the amount removed from his L&G coding notice, but have been allocated differently as between the income sources.
Coding notices for 2010-11 dated 22 March 2010
39.	HMRC Edinburgh sent a further coding notice twelve days later. This removed all Mr Clark’s personal allowance from his L&G pension, so his coding notice for that pension became BR. 
40.	HMRC Cardiff sent him two coding notices:
(1)	One allocated £4,751 of his £6,475 personal allowance against his ESA, leaving a balance of £1,724. The code of 172L was sent to the MoD. 
(2)	One allocated £3,224 against his ESA; the code of 322T was sent to the DWP.
41.	The sum deducted from his personal allowance for his ESA on one notice does not equal the amount allocated on the other. This appears to be simply an error. 
Conclusions on the facts
42.	Several points emerge clearly from these facts, and I thus find that:
(1)	 there were at least two mistakes in 2009-10:
(a)	The DWP did not apply the BR coding notice to his ESA; and 
(b)	HMRC mistakenly gave Mr Clark two personal allowances, although he did not receive the full “benefit” of the second personal allowance;
(2)	Mr Clark tried very hard to ensure that his income was correctly taxed before receipt, by contacting HMRC on four or five occasions before the end of the 2009-10 tax year; and
(3)	he received fourteen separate coding notices in the same period, January to March 2010. They are confusing and difficult to understand. 

43.	I further find that it was reasonable for Mr Clark to believe that the number of notices received in this three month period, before the end of the 2009-10 tax year, meant HMRC had the issue of his four income sources under control and that the correct tax would be deducted before receipt. 
The legislation
44.	Employment income is chargeable to income tax under Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) Part 2. Most UK pension income is charged to tax under ITEPA s 571, s 578 or s 589B. 
45.	By ITEPA s 683, employment and pension income are both within “PAYE income”. HMRC are required by ITEPA s 684 to make regulations with respect to the assessment, charge, collection and recovery of PAYE income. These are the Income Tax (Pay As You Earn) Regulations 2003 (“the Regulations”). All references to regulations in this Decision are to these Regulations.
46.	ITEPA s 684(7) states that the Regulations “have effect despite anything in the Income Tax Acts”.
47.	ITEPA s 684(2) lists the provisions which may be included in the Regulations. They include:
“1. Provision 
(a)	for requiring persons making payments of, or on account of, PAYE income to make, at the relevant time, deductions or repayments of income tax calculated by reference to tax tables prepared by the Commissioners, and
(b)	for making persons who are required to make any such deductions or repayments accountable to or, as the case may be, entitled to repayment from the Board
…
2 (a)	for repayments or deductions to be made, if and to the extent that the payee does not object, in respect of any amounts…remaining unpaid (or treated as remaining unpaid) on account of—
(i)	income tax in respect of income for a previous tax year
(ii) 	capital gains tax in respect of chargeable gains for such a year; and
(b) 	as to the circumstances in which repayments or deductions may be made, and the circumstances and manner in which a payee may object to the making of repayments or deductions.
…
4A Provision authorising the recovery from the payee rather than the payer of any amount that an officer of Revenue and Customs considers should have been deducted by the payer.”

The Regulations
48.	Reg. 13 requires HMRC to determine the code the employer must use, and Reg. 14(1)(d) says that in determining a code, HMRC must have regard to any tax remaining unpaid for any previous tax year not otherwise recovered, so far as this is known to them. 
49.	Reg. 11 states that pension payers are within the Regulations.
50.	The position of the DWP is complicated. On my reading of the interaction between ITEPA and the Regulations, the DWP is obliged to operate the coding notice received, but if it fails to do so, HMRC cannot collect the underpayment from the employee. This is because the regulation which allows HMRC to collect from employees if the employer fails to deduct (Reg.72) is disapplied for DWP payments.
51.	The relevant provisions are as follows:
(1)	Reg. 12(1)(a) states that “other payers” are within the regulations. 
(2)	‘Other payers’ are defined in Reg. 2 as “a person making relevant payments in a capacity other than an employer, agency or pension payer”. The DWP is thus an “other payer”.
(3)	The term “relevant payments” is defined in Reg. 4 as:
“(1)…payments of, or on account of, PAYE income, except payments of or on account of−
(a)	PAYE social security income, except so far as it is provided for in Part 8 [of the Regulations]”
(4)	Thus the ESA is within the scope of the PAYE regulations, but only to the extent specified by Part 8. Part 8 includes Reg. 184B(1), which lists the regulations applying to ESA payments. 
(5)	That list includes Reg. 21, which requires “employers to deduct or repay tax in accordance with these regulations by reference to the employee’s code, if the employer has one for the employee.” Here, the term “employer” means “the Department” (Reg. 184B(2)).
(6)	However, Reg. 72, which allows HMRC to recover from the employee tax not deducted by the employer, is not on the list of regulations which apply to the ESA; neither is it brought into play by any other provision within Part 8.	 
HMRC error and concessions
52.	Under the Taxes Management Act 1970 (TMA) s 1 HMRC are given responsibility for the collection and management of income tax. In R (on the application of Wilkinson) v IRC [2003] STC 1113 (“Wilkinson”) at [29], HMRC accepted, before the Court of Appeal, that these powers include: 
	“wide managerial discretion to refrain from recovering taxes which are payable under a strict application of the relevant legislation.”
53.	In the House of Lords judgment in the same case, Lord Hoffmann said at [21] that:
“This discretion enables the Commissioners to formulate policy in the interstices of the tax legislation, dealing pragmatically with minor or transitory anomalies, cases of hardship at the margins or cases in which a statutory rule is difficult to formulate or its enactment would take up a disproportionate amount of Parliamentary time.”
54.	It is in reliance on this power that HMRC issues ESCs. In ESC A19 HMRC have set out a number of situations in which underpayments of PAYE income will not be collected. It reads as follows:
“Arrears of income tax or capital gains tax may be given up if they result from the Inland Revenue's failure to make proper and timely use of information supplied by—
•	a taxpayer about his or her own income, gains or personal circumstances;
•	an employer, where the information affects a taxpayer's coding; or
•	the Department for Work & Pensions, about a taxpayer's State retirement, disability or widow's pension.
Tax will normally be given up only where the taxpayer—
•		could reasonably have believed that his or her tax affairs were in order; and
•	was notified of the arrears more than 12 months after the end of the tax year in which the Revenue received the information indicating that more tax was due…
In exceptional circumstances arrears of tax notified 12 months or less after the end of the relevant tax year may be given up if the Revenue—
•	failed more than once to make proper use of the facts they had been given about one source of income;
•	allowed the arrears to build up over two whole tax years in succession by failing to make proper and timely use of information they had been given.”
Assessment and appeals
55.	TMA s 29 sets out the legislation where a loss of tax is discovered:
“(1)	If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment—
(a)	that any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax, have not been assessed, or
(b)	that an assessment to tax is or has become insufficient, or
(c)	that any relief which has been given is or has become excessive,
the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.”
56.	TMA s 30A is headed “Assessing Procedure” and reads as follows:
	(1)	Except as otherwise provided, all assessments to tax which are not self-assessments shall be made by an officer of the Board.
(2)	…
(3)	Notice of any such assessment shall be served on the person assessed and shall state the date on which it is issued and the time within which any appeal against the assessment may be made.
(4)	After the notice of any such assessment has been served on the person assessed, the assessment shall not be altered except in accordance with the express provisions of the Taxes Acts.
(5)	Assessments to tax which under any provision in the Taxes Acts are to be made by the Board shall be made in accordance with this section.
57.	TMA s 31(1)(d) says that that an appeal may be brought against any assessment to tax which is not a self-assessment.
58.	TMA s 59B(6) provides for the collection of tax under assessments which are not self-assessments, and reads:
“Any amount of income tax or capital gains tax which is payable by virtue of an assessment made otherwise than under section 9 of this Act shall, unless otherwise provided, be payable on the day following the end of the period of 30 days beginning with the day on which the notice of assessment is given.”
59.	TMA s113(3) reads as follows:
	“Every assessment, determination of a penalty duplicate, warrant, notice of assessment, of determination or of demand, or other document required to be used in assessing, charging, collecting and levying tax or determining a penalty shall be in accordance with the forms prescribed from time to time in that behalf by the Board, and a document in the form prescribed and supplied or approved by them shall be valid and effectual.”
The submissions of the parties
60.	Mr Clark said that he “received 17 separate letters from the various tax offices notifying me of my tax allowances, and assumed all was correct…I thought that my tax allowances were correct.” 
61.	He is currently unrepresented and does not make any submissions in relation to his rights of appeal or the jurisdiction of the Tribunal.
62.	HMRC say: 
“where PAYE does not get things right in the tax year, matters are sorted out informally at the year end rather than by assessment. Under informal procedures that have existed for many years, underpayments…are automatically coded out for collection through PAYE in a later year. These informal procedures are set up under the general power given to the Commissioners of HMRC to manage the tax system. In this case, following the end of year reconciliation, HMRC issued a PAYE informal calculation to the appellant…there is no provision in statute for an appeal against a PAYE informal calculation.”
63.	They further say that the tax is rightly due, and that Mr Clark does not fall within ESC A19 because he was notified of the underpayment within the twelve month period after the end of the 2009-10 tax year. They submit that “the discretion to exercise an ESC or not lies with HMRC, and a refusal to apply an ESC or not is not an appealable decision.”
Discussion 
64.	The Tribunal must first decide whether it is plain and obvious, so as to meet the test for striking out, that Mr Clark does not have appeal rights against the following:
(1)	the informal Tax Calculation Notice;
(2)	HMRC’s refusal to apply ESC A19;
(3)	HMRC’s attempt to collect tax from the DWP underpayment;
(4)	HMRC’s attempt to code out the underpayment
65.	If one or more of these does not meet the threshold for striking out, so Mr Clark may have a right of appeal, the second question is whether this Tribunal has the jurisdiction to hear his appeal. 
The Calculation Notice
66.	HMRC say that the Calculation Notice is an “informal assessment” issued under their discretionary powers of care and management, and so there is no statutory right of appeal. 
67.	However, under TMA s 31(1)(d), taxpayers have a right to appeal against “an assessment which is not a self-assessment”. 
68.	TMA s118 defines various key terms in the Act, but does not include a definition of “assessment”. TMA s 30A(3) states that assessments must include “the time within which any appeal against the assessment must be made.” TMA s 113(3) says that HMRC must prescribe the form to be used for an assessment. But neither of these statutory provisions actually defines an assessment. 
69.	The existence of an appeal right would satisfy the requirements of natural justice and human rights law. I do not expand on either, but leave this to be argued by the parties in the main hearing.
70.	If HMRC are correct, this means they are acting intra vires when they use their residual discretion to issue informal assessments and thereby bypass taxpayer appeal rights. This might be seen as a surprising result, given not only the human rights and public law issues, but also the very precise legislation as to when and how HMRC can assess taxpayers, and the linked appeal rights. After all, assessments and appeals do not sit in the “interstices of the tax legislation” as Lord Hoffmann put it in Wilkinson, when describing the scope of HMRC’s discretionary powers. 
71.	It is thus clearly arguable that this “informal calculation” is an “assessment” other than under self-assessment, as referred to in TMA s 59B(6), perhaps a “discovery assessment” falling within TMA s 29. 
72.	If the Calculation Notice sent to Mr. Clark is a notice of an “assessment”, it can be appealed under TMA s 31. 
ESC A19
73.	The ESC has two limbs. The first deals with when tax will “normally” be given up. It has two conditions, both of which have to be satisfied. This is clearly shown by the use of the word “and”, which links the two conditions.
74.	Mr Clark says, and I have found as a fact, that he meets the first of the two conditions, in that he reasonably believed his affairs were in order. 
75.	However, since Mr Clark was informed of the underpayment within the twelve month period after the end of the 2009-10 tax year, he fails the second condition. It is thus correct that he does not fall within this first limb of the concession. 
76.	The second limb “may” apply “in exceptional circumstances”, when HMRC:
“failed more than once to make proper use of the facts they had been given about one source of income;
allowed the arrears to build up over two whole tax years in succession by failing to make proper and timely use of information they had been given.”
77.	These two phrases are not linked by “and”, in contrast to the conditions in the first limb of the ESC. I also note that the first phrase refers to “proper use” and the second to “proper and timely use”. The second reference to “proper…use” would be otiose if the two phrases were interlinked conditions. I thus read each phrase as alternative ways of coming within the ESC. 
78.	In the instant case, HMRC were told by Mr Clark on four or five occasions, before the end of the 2009-10 fiscal year, about his retirement and his four different sources of income. Despite this, they gave him two personal allowances. I thus find that they “failed to make proper use” of the facts with which they had been provided, and thus that he would fall within the first of the two alternative ways for meeting the second “exceptional” part of the ESC.
79.	This does not mean that he automatically falls within its scope, but that he may do so; there is no evidence that this possibility has been considered by HMRC. 
80.	However, statute provides him with no right of appeal against HMRC’s refusal to apply an ESC. I consider below whether this issue can be considered by the Tribunal.
The DWP underpayment
81.	The coding notice sent to the DWP in relation to the ESA on 27 January 2010 by HMRC Cardiff required the DWP to deduct 20% tax from the ESA. According to the Calculation Notice, there has been no deduction. 
82.	Had the DWP been a regular employer, not subject to the special rules in Part 8 of the Regulations, HMRC would have been able to collect the underpayment from Mr Clark by following the procedure set out in Reg. 72 as follows:
(1)	Before HMRC can seek to collect an underpayment from an employee, either Condition A or Condition B must be met. Condition A requires the employer to satisfy HMRC that he took reasonable care to comply with the Regulations, and that the error was made in good faith. Condition B applies where the employee knew that the employer had “wilfully” failed to deduct the tax.
(2)	If HMRC decide that one of these Conditions apply, they can collect the underpayment from the employee. However, to do so, they must issue a Direction to both the employer and the employee (Reg. 72(5A)).
(3)	Any tax included in the Direction is not also to be included in any assessment on the employee (Reg. 72(6)).
83.	If a Direction is issued under Reg. 72, the employee can appeal the Direction (Reg. 72B).
84.	Therefore, had Part 8 “switched on” Reg. 72 in relation to ESA payments, HMRC could only have used that Regulation if they had first been satisfied that the DWP acted in good faith. They would then have had to issue a formal Direction to both the employee and employer, which would have been appealable. 
85.	But, as explained earlier in this Decision, on my reading of the ITEPA and the Regulations, Reg. 72 does not apply to the ESA. 
86.	Since the Regulations take effect “despite anything in the Tax Acts” (ITEPA s 684(7)), this leads to the provisional conclusions that:
(1)	 it is not possible to look elsewhere for a power by which HMRC can assess Mr Clark for the amounts not deducted by the DWP; and in consequence
(2)	HMRC have acted ultra vires their powers in seeking to collect this underpayment from Mr Clark. 
87.	If HMRC have acted ultra vires their powers, Mr Clark has no free-standing right of appeal. Whether Mr Clark can appeal this possible failure to this Tribunal is discussed below.
Collecting the underpayment by coding out
88.	Two further questions arise over HMRC’s powers to code out an underpayment. 
89.	First, ITEPA s 684(2)(a) allows regulations to be made under which HMRC can code out an underpayment “if and to the extent that the payee does not object”. This indicates that Reg. 14(1)(d), which states that when determining a code, HMRC must have regard to tax unpaid for previous years, is conditional upon the taxpayer not objecting. Mr Clark has objected to the collection of the tax per se and thus by implication to its collection by way of an adjustment to his coding notice. 
90.	If a taxpayer objects, HMRC could of course issue him with a self-assessment return. If this had happened in this case, Mr Clark would then have a right of appeal against any subsequent HMRC amendment to that self-assessment, by virtue of TMA s 31. 
91.	Secondly, there may be a further, more fundamental point. Reg. 14(1)(d) allows HMRC to code out tax which “remains unpaid”. Does this include tax not collected by way of PAYE coding notice in a previous year? The use of the word “unpaid” implies that the tax must first have been “payable”. Non self-assessment tax is only “payable” by an individual, according to the TMA, if it is the subject of an assessment under s59B(6). 
92.	In the instant case, of course, HMRC are arguing that the Calculation Notice is not an “assessment”. It thus possible that, if they are right, there may be no tax “unpaid”, within the meaning of the Regulations, so precluding its collection by coding out. 
93.	Again, if HMRC have acted ultra vires, Mr Clark has no free-standing right of appeal, and the Tribunal can only consider this question if it has judicial review powers.
Conclusions on Mr Clark’s appeal rights
94.	The analysis above leads me to the conclusion that it is not “plain and obvious” that Mr Clark has no right of appeal against the Tax Calculation Notice. It is certainly arguable that this is a notice of assessment, other than a self-assessment. If this is the case, he has the right to appeal this to the Tribunal. 
95.	On the other issues - the ESC, the DWP under-deduction and the coding out - there is no free-standing right of appeal. 
The powers of the Tribunal
96.	Even if Mr Clark has a right of appeal, the Tribunal should strike out his case if it is “plain and obvious” that the issues he is asking us to consider are not within our jurisdiction. 
97.	Useful, albeit obiter, comment on the extent of the Tribunal’s jurisdiction was recently provided by Sales J in Oxfam v HMRC [2009] EWHC 3078 (Ch) at [68]. He said that: 
“…sometimes the Tribunal will have to apply public law concepts in order to determine cases before it. It happens regularly elsewhere in the legal system that courts or tribunals with jurisdiction defined in statute by general words have jurisdiction to decide issues of public law which may be relevant to determination of questions falling within their statutorily defined jurisdiction. No special language is required to achieve that effect. Where they are themselves independent and impartial courts or tribunals (as the Tribunal is) there is no presumption that public law issues are reserved to the High Court in the exercise of its judicial review jurisdiction.”
98.	There are other authorities which say that the Tribunal’s jurisdiction is more limited, including Customs and Excise Comrs v National Westminster Bank plc [2003] STC 1072.
99.	Given the current uncertain state of the authorities, it is not plain and obvious that all of the following issues fall outside the Tribunal’s jurisdiction:
(1)	whether HMRC were acting ultra vires their powers when they sought to collect the underpayment:
(a)	on the DWP amount;
(b)	in the face of Mr Clark’s objection to the coding out;  and/or 
(c)	if the tax is not “unpaid” within the meaning of the TMA. 
(2)	HMRC’s approach to ESC A19.
(3)	the exercise of HMRC’s residual discretion under TMA s 1. 
Decision and Directions
100.	In the light of the foregoing, I find that it is not plain and obvious that Mr Clark’s appeal should be struck out. I thus refuse HMRC’s application and direct as follows:
DIRECTIONS
101.	If this appeal is not settled by agreement by 30 June 2011, it is to be reclassified as a Standard Case under Rule 23(3) of the Tribunal Rules before a judge and a tax-qualified member, and listed for further argument on the following preliminary questions:
(1)	Whether HMRC’s “Calculation Notice” is an “assessment” for the purposes of the taxpayer’s appeal rights under TMA s 31. 
(2)	If not, whether the taxpayer has any right of appeal against the Calculation Notice. 
(3)	If the taxpayer does have a right of appeal, whether the Tribunal has jurisdiction over:
(a)	HMRC’s operation of its discretion in the context of ESC A19; 
(b)	HMRC’s decision to collect the DWP amount; and/or
(c)	HMRC’s powers to collect an underpayment.
102.	If the Tribunal decides that the taxpayer has appeal rights, and that the Tribunal has jurisdiction, then the parties should proceed to argue the substantive case.
103.	The Tribunal will require a skeleton argument (to include authorities) from any party which is legally represented, to be lodged with the Tribunal not less than seven calendar days before the date fixed for the hearing.
104.	The parties are each of them to write to the Tribunal by 7 July 2011 with:
(1)	their estimate of how long the further hearing should be listed for; and
(2)	what dates in the period from August to November 2011 (inclusive) would be inconvenient for the hearing.
Note on representation
105.	Mr Clark’s attention is drawn to the section headed “Community Legal Advice and other help” at page 5 of the booklet “Making an appeal” available at justice.gov.uk/guidance/courts-and-tribunals/tribunals/tax/appeals.htm, which may provide him with guidance as to how he might obtain assistance with his appeal. 
106.	For ease of reference the relevant paragraph is set out here:
“Free legal assistance is not available in most tax appeals, see www.communitylegaladvice.org.uk. However, if you are on a low income, you may be able to get free help, for example from:
•	a qualified lawyer or accountant (although most will wish to charge a fee) 
•	a Citizens Advice Bureau 
•	TaxAid at http://www.taxaid.org.uk 
•	TOP – TaxHelp for Older People at http://www.taxvol.org.uk which provides help to those over 60. 
Any of the above are also able to refer your case to the Bar Pro Bono Unit. This is a charity which provides free legal assistance from volunteer barristers, see www.barprobono.org.uk. You cannot apply directly to the Unit, but if your adviser refers the case, and it is accepted, a barrister will act for you before the Tribunal. It is strongly recommended that you make contact with an adviser in good time before the date of your appeal, as it may otherwise be impossible to provide support. Because of resource constraints, the organisations listed above cannot guarantee that free legal help will be provided.”
107.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

Anne Redston

TRIBUNAL PRESIDING MEMBER
RELEASE DATE: 9 MAY 2011