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     4. After regulation 72 insert - 

" Employer's request for a direction and appeal against refusal
     72A.  - (1) In relation to condition A in regulation 72(3), the employer may by notice to the Inland Revenue ("the notice of request") request that the Inland Revenue make a direction under regulation 72(5).

    (2) The notice of request must - 


(a) state - 


(i) how the employer took reasonable care to comply with these Regulations; and

(ii) how the error resulting in the failure to deduct the excess occurred;



(b) specify the relevant payments to which the request relates;

(c) specify the employee or employees to whom those relevant payments were made; and

(d) state the excess in relation to each employee.



    (3) The Inland Revenue may refuse the employer's request under paragraph (1) by notice to the employer ("the refusal notice") stating - 



(a) the grounds for the refusal, and

(b) the date on which the refusal notice was issued.



    (4) The employer may appeal against the refusal notice - 



(a) by notice to the Inland Revenue,

(b) within 30 days of the issue of the refusal notice,

(c) specifying the grounds of the appeal.



    (5) For the purpose of paragraph (4) the grounds of appeal are that - 



(a) the employer did take reasonable care to comply with these Regulations, and

(b) the failure to deduct the excess was due to an error made in good faith.



    (6) If on appeal under paragraph (4) it appears to the Commissioners that the refusal notice should not have been issued they may direct that the Inland Revenue make a direction under regulation 72(5) in an amount the Commissioners determine is the excess for one or more tax periods falling within the relevant tax year.

Employee's appeal against a direction notice where condition A is met
     72B.  - (1) An employee may appeal against a direction notice under regulation 72(5A)(a) - 



(a) by notice to the Inland Revenue,

(b) within 30 days of the issue of the direction notice,

(c) specifying the grounds of the appeal



    (2) For the purpose of paragraph (1) the grounds of appeal are that - 



(a) the employer did not act in good faith,

(b) the employer did not take reasonable care, or

(c) the excess is incorrect.



    (3) On an appeal under paragraph (1) the Commissioners may - 



(a) if it appears to them that the direction notice should not have been made, set aside the direction notice; or

(b) if it appears to them that the excess specified in the direction notice is incorrect, increase or reduce the excess specified in the notice accordingly.



Employee's appeal against a direction notice where condition B is met
     72C.  - (1) An employee may appeal against a direction notice under regulation 72(5A)(b) - 



(a) by notice to the Inland Revenue,

(b) within 30 days of the issue of the direction notice,

(c) specifying the grounds of the appeal.



    (2) For the purpose of paragraph (1) the grounds of appeal are that - 



(a) the employee did not receive the payments knowing that the employer wilfully failed to deduct the amount of tax which should have been deducted from those payments, or

(b) the excess is incorrect.



    (3) On an appeal under paragraph (1) the Commissioners may - 



(a) if it appears to them that the direction notice should not have been made, set aside the direction notice; or

(b) if it appears to them that the excess specified in the direction notice is incorrect, increase or reduce the excess specified in the notice accordingly.



Appeals: supplementary provisions
     72D.  - (1) This regulation applies to appeals under regulations 72A(4), 72B, 72C and 81A.

    (2) Subject to paragraph (4), an appeal is to the General Commissioners but the employer or employee as appropriate may elect (in accordance with section 46(1) of TMA[3]) to bring the appeal before the Special Commissioners instead.

    (3) Section 31D(2) to (7) of TMA[4] (election to bring appeal before Special Commissioners) has effect in relation to an election under paragraph (2) (as in relation to an election under subsection (1) of that section).

    (4) If in respect of the same error by an employer in relation to condition A in regulation 72(3) - 



(a) more than one employee is appealing under regulation 72B; or

(b) there is an appeal by an employer under regulation 72A(4) and by an employee under regulation 72B



the Commissioners who are to determine the appeals are given in paragraphs (5) to (7).

    (5) If - 



(a) the same body of General Commissioners has jurisdiction with respect to all the persons concerned, and

(b) none of those persons has elected in accordance with section 46(1) of TMA to bring the appeal before the Special Commissioners



the appeals are to be determined by that body of General Commissioners.

    (6) If - 



(a) different bodies of General Commissioners have jurisdiction with respect to the persons concerned, and

(b) none of those persons has elected in accordance with section 46(1) of TMA to bring the appeal before the Special Commissioners



the appeals are to be determined by such of those bodies as the Board of Inland Revenue determine.

    (7) In any other case, the appeals are to be determined by the Special Commissioners.

    (8) Where paragraph (4) applies or the appeal is material to the liability to tax of the employer and the employee, all the persons concerned are entitled - 



(a) to appear before and be heard by the Commissioners, or

(b) to make representations in writing



    (9) On hearing an appeal the General Commissioners or the Special Commissioners may allow the employer or employee as appropriate to put forward grounds not specified in the notice, and take them into consideration, if satisfied that the omission was not wilful or unreasonable.".

     5. In regulation 81 after paragraph (4) insert - 

    " (4A) If condition A or B is met, any direction under paragraph (4) must be made by notice ("the direction notice") to the employee stating the date the notice was issued.".

     6. After regulation 81 insert - 

" Employee's appeal against direction notice
     81A.  - (1) An employee may appeal against a direction notice under regulation 81(4A) - 


(a) by notice to the Inland Revenue,

(b) within 30 days of the issue of the direction notice,

(c) specifying the grounds of the appeal.



    (2) For the purpose of paragraph (1) the grounds of appeal are that - 



(a) in relation to condition A in regulation 81, the employee did not receive the payments knowing that the employer wilfully failed to deduct the amount of tax which should have been deducted from those payments,

(b) in relation to condition B in regulation 81, the relevant payment was not a notional payment, or

(c) the excess is incorrect.



    (3) On an appeal under paragraph (1) the Commissioners may - 



(a) if it appears to them that the direction notice should not have been made, set aside the notice; or

(b) if it appears to them that the amount of tax specified in the direction notice is incorrect, increase or reduce the amount specified in the notice accordingly.



    (4) Regulation 72D applies to appeals under this regulation.".

Nick Montagu

Dave Hartnett
Two of the Commissioners of Inland Revenue

19th March 2004

[2] S.I. 2003/2682.back

[3] 1970 c. 9. In these Regulations "TMA" means the Taxes Management Act. Section 46(1) was amended by paragraph 2 of Schedule 7 to the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2) and paragraph 1 of Schedule 6 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order (S.I. 1999/671).back

[4] Section 31D(2) to (7) were inserted by section 88 of and paragraph 11 of Schedule 29 to the Finance Act 2001(c. 9).back

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