Spc00641

JURISDICTION – disputed decision concerns the use of employers’ PAYE references - whether an appeal lies to the Special Commissioners – no – appeal dismissed – TMA 1970 ss 1(1) and 31(1)(d); ITEPA 2003 s 684; Income Tax (Pay As You Earn) Regulations 2003 SI 2003 Reg 80  

THE SPECIAL COMMISSIONERS 

ORIEL SUPPORT LIMITED
Appellant

 - and -   	

THE COMMISSIONERS FOR HER MAJESTY’S 
REVENUE AND CUSTOMS 
Respondents

Special Commissioner : DR A N BRICE

Sitting in London on 7 October 2007

Nicholas Ashton, Counsel, instructed by BNB Tax Consultants, for the Appellant 

Peter Mantle, Counsel, instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The appeal
1.	Oriel Support Limited (the Appellant) appeals against a decision of The Commissioners for Her Majesty’s Revenue and Customs (the Revenue). The decision was contained in a letter dated 8 December 2006 and was in the following terms:

“As I have had so much difficulty in identifying and confirming the PAYE audit trail for both the current year and last year, I now ask Oriel Support Limited, as agent, to implement simple changes to their processes which will make the audit trail much clearer for the future.

This will require Oriel Support Limited to remit the PAYE due for each of the agencies/businesses it represents under the individual PAYE references for each agency/business, and not collectively under the Oriel Support Limited PAYE reference as currently happens.”

The preliminary issue  
2.	I was asked to determine, as a preliminary issue in the appeal, whether the Special Commissioners had jurisdiction to hear an appeal from the disputed decision. The Appellant was of the view that the Special Commissioners might have jurisdiction and the Revenue were of the view that they did not.

The legislation
3.	The relevant legislation is contained in the Taxes Management Act 1970 (the 1970 Act); the Income Tax (Earnings and Pensions) Act 2003 (the 2003 Act); and the Income Tax (Pay As You Earn) Regulations 2003 SI 2003 No. 2682 (the 2003 Regulations).

The 1970 Act
4.	Section 1 of the 1970 Act provides that the Revenue shall be responsible for the collection and management of income tax.  

5.	Part V of the 1970 Act (sections 44 to 59) deals with appeals and other proceedings. Section 31 contains provisions about appeals and rights of appeal and the relevant part of the section provides:

“31(1)	An appeal may be brought against -…
(d)	any assessment to tax which is not a self-assessment.”

The 2003 Act
6.	Part 11 (sections 682 to 712) of the 2003 Act contains provisions about Pay As You Earn (PAYE). Section 684(1) provides:

“684(1)	The Commissioners for Her Majesty’s Revenue and Customs must make regulations (“PAYE regulations”) with respect to the assessment, charge, collection and recovery of income tax in respect of all PAYE income.

(2)	PAYE regulations may, in particular, include any such provision as is set out in the following list  
	List of Provisions …
8.	Provision for the making of decisions by Her Majesty’s Revenue and Customs as to any matter required to be decided for the purposes of the regulations and for appeals against such decisions. 
9.	Provision for appeals with respect to matters arising under the regulations which would otherwise not be the subject of an appeal. …”

The 2003 Regulations
7.	Under the provisions of section 684(1) the Revenue have made the 2003 Regulations. Regulation 2 contains some definitions and defines “employer’s PAYE reference” as the combination of the employer’s employer reference and the Inland Revenue office number. 

8.	Part 4 (regulations 68 to 97) contains provisions about payment, returns and information. Regulation 80 is headed “Determination of unpaid tax and appeal against assessments” and the relevant parts provide:

“80(1)	This regulation applies if it appears to the Inland Revenue that there may be tax payable for a year … by an employer … which has neither been –
(a)	paid to the Inland Revenue, nor …
(a)	

(2)	The Inland Revenue may determine the amount of that tax to the best of their judgment and serve notice of their determination on the employer. …    

(5)	A determination under this regulation is subject to Parts 4, 5 (other than section 55) and 6 of TMA (assessment, appeals, collection and recovery) as if-
(a)	the determination were an assessment, and
(b)	the amount of tax determined were income tax charged on the employer
and those Parts of that Act apply accordingly with necessary modifications.”

The facts
9.	An agreed bundle of documents, and an agreed supplementary bundle, were produced. I did not hear any oral evidence. 

10.	The relevant facts are that the Appellant provides an administrative and financial outsourcing service for its clients who are other businesses and agencies. In particular it pays earnings to workers who are employed by its clients. The Appellant accepts that the workers are employed by the clients of the Appellant and that the Appellant is not the employer of the workers for employment law purposes. It is also common ground that the earnings are emoluments. In respect of the earnings which are paid to the workers the Appellant accounts for PAYE to the Revenue but uses its own employer’s PAYE reference and not the employers’ PAYE references of each of its clients. 

11.	Some months before the disputed decision the Appellant 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 substantive arguments
12.	Before turning to consider the arguments of the parties about jurisdiction it is convenient to summarise the substantive arguments which the parties would make if the appeal proceeds. I deliberately do not expand or consider these arguments but have found it useful to be aware of what they are.

13.	The Appellant’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 Appellant could not account for PAYE as an intermediary under section 687(2) of the 2003 Act or as an “other payer” within the meaning of regulation 12(1)(a) of the 2003 Regulations and, in the Appellant’s view, the Revenue had been wrong to reach those implied decisions.   

14.	The Revenue were of the view that they were entitled to ask the Appellant, 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 Appellant 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.  

The arguments about jurisdiction 
15.	Mr Ashton, for the Appellant, argued that the Special Commissioners had jurisdiction to hear an appeal against the disputed decision under the provisions of section 31(1)(d) of the 1970 Act. He cited Vickerman v Mason’s Personal Representatives [1984] STC 231 for the principle that the phrase “assessment to tax” covered all the various stages leading up to the calculation and statement of the tax payable. He argued that, although normally the word assessment was used to mean an amount of tax, it could include an assessment of a situation or state of affairs. Mr Ashton also cited Bootle v Bye [1996] STC (SCD) 58 for the principles that the word assessment is not used consistently in the income tax legislation (paragraph 65) and that section 31(1)(d) gave the Special Commissioners jurisdiction to decide whether an employee was liable to pay tax which the employer should have paid (paragraph 74). It followed that the disputed decision in this appeal could be an assessment because it concerned the liability of the Appellant to account for PAYE in the future. Alternatively Mr Ashton argued that section 684(2).9 of the 2003 Act indicated that it was the intention of Parliament that any decisions taken by the Revenue under the 2003 regulations should carry a right of appeal. 

16.	For the Revenue Mr Mantle argued that the disputed decision was an administrative decision made by the Revenue under its care and management powers which were a consequence of section 1(1) of the 1970 Act. There was nothing in section 684 of the 2003 Act which gave the Special Commissioners jurisdiction in this appeal. He referred to the 2003 regulations and argued that there was nothing there which gave the Special Commissioners jurisdiction either. He referred to section 31(1)(d) of the 1970 Act and argued that the phrase “assessment to tax” should be given its plain meaning and did not mean the assessment of a situation or a state of affairs. It meant a statement of the amount of tax due and did not include the disputed decision. Turning to the Appellant’s alternative argument, Mr Mantle contended that any argument that the Revenue had erred in failing to make regulations was not one which could be decided by the Special Commissioners. Although Mr Mantle did not agree that the disputed decision implied that the Revenue had decided that the Appellant could not account for PAYE as an intermediary or as an “other payer” he was content for a view to be expressed as to whether such implied decisions were within the jurisdiction of the Special Commissioners.

Reasons for decision
17.	In considering the arguments of the parties I start from the point that the Special Commissioners is a statutory tribunal and the jurisdiction is statutory. That means that the Special Commissioners do not have an inherent jurisdiction and may only exercise jurisdiction if given to them by specific statutory provision. The disputed decision was made under the care and management powers given to the Revenue by section 1(1) of the 1970 Act. Section 31 of the same Act contains the provisions about appeals. There is nothing in section 31 giving the right of appeal to the Special Commissioners from a decision relating to care and management.

18.	The Appellant argued that section 31(1)(d) was wide enough to include an assessment of a state of affairs. I do not agree, The phrase used in section 31(1)(d) is “any assessment to tax” and the disputed decision is not an assessment to tax. I have not found the authorities relied upon by Mr Ashton to be of assistance. The issue in Vickerman (1984) 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. Vickerman therefore is authority for the principle that the words “assessment to tax” include the statement of the amount of tax due but is not authority for the view that the words have any wider meaning or that they could mean an assessment of a state of affairs.

19.	Bootle v Bye (1996) concerned an appeal against assessments to income tax under Schedule 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 section 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 is authority for the principle that the phrase “assessment to tax” means assessment of the amount of tax actually payable but is not authority for the view that the words have any wider meaning or that they could mean  an assessment of a state of affairs.

20.	The Appellant argued that the disputed decision in this appeal could be an assessment because it concerned the liability of the Appellant to account for PAYE in the future. I do not see the disputed decision in that way. The disputed decision does to seek to alter the fact that the Appellant pays the tax to the Revenue; all it does is to require the payments to be accompanied by the employers’ PAYE references of the clients of the Appellant. 

21.	Thus I conclude that section 31(1)(d) does not give the Special Commissioners jurisdiction to consider an appeal against the disputed decision in this appeal.

22.	I have gone on to consider whether there are any other provisions giving the right of appeal to the Special Commissioners but cannot find that there are. Section 684(2).8 and .9 of the 2003 Act provide for regulations to include provisions for rights of appeal and regulation 80 of the 2003 regulations contains such provision. However, the disputed decision is not a determination of an amount of tax and so regulation 80 does not confer jurisdiction. I agree with Mr Mantle that any argument that the Revenue had erred in failing to make regulations is not one which can be considered by the Special Commissioners.

23.	Both parties asked me to express a view as to whether the Special Commissioners had jurisdiction to hear an appeal from the decisions which the Appellant claimed were implied in the disputed decision, namely that the Appellant could not account for PAYE as an intermediary under section 687(2) of the 2003 Act or as an “other payer” within the meaning of regulation 12(1)(a) of the 2003 Regulations. Here I agree with the Revenue that the disputed decision did not imply the further decisions claimed by the Appellant. However, even if it did, then in my view the same statutory provisions about jurisdiction apply and there is no provision which gives the Special Commissioners jurisdiction to hear an appeal about the decisions which are claimed to be implied. 

Decision
24.	My decision on the preliminary issue is that the Special Commissioners do not have jurisdiction to hear an appeal from the disputed decision.

25.	That means that the appeal must be dismissed. 

DR NUALA BRICE

SPECIAL COMMISSSIONER 

RELEASE DATE: 11 October 2007

SC 2031/2007
10.10.07