APNs based on PAYE determinations were validly issued

In Sheiling Properties Ltd v HMRC [2021] EWCA Civ 1425, the Court of Appeal agreed that an Accelerated Payment Notice (APN) could be issued to an employing company for PAYE liabilities determined under Regulation 80. The amounts determined were ‘disputed tax’ under the APN rules.

Sheiling Properties Ltd had entered into a marketed avoidance scheme with two directors which was notified under the Disclosure of Tax Avoidance Scheme (DOTAS) rules.

• HMRC issued the company with Regulation 80 determinations for PAYE and section 8 decisions for National Insurance Contributions (NICs) in respect of the amounts paid to the directors under the scheme. These were followed by the issue of APN’s to the company.
  • When the APN’s remained unpaid HMRC issued Penalty notices.
• The company Appealed the determinations. It also appealed the APN’s and the Penalty notices on the grounds that there was no ‘disputed tax’ as the regulation 80 notices were not assessments to tax for the purposes of the APN legislation.
• Only the penalty appeal cases reached the tribunals. Both the First Tier Tribunal (FTT) and Upper Tribunal (UT) disagreed, dismissing the appeals.

The Court of Appeal agreed with the lower courts finding that the term ‘disputed tax’ in the APN legislation can include amounts stated in a regulation 80 determination.

• Through regulation 80(5), a regulation 80 determination is to be treated as if it were an assessment and as if the amount of tax determined were Income Tax charged on the employer with regards to the assessment, appeal, collection and recovery of tax under TMA 1970.
• Since an appeal against a regulation 80 notice is therefore clearly a tax appeal, the APN legislation would be rendered ineffective if regulation 80 determinations could not be ‘disputed tax’ and this could not, rationally, be the intention of Parliament.
• If at all possible, the legislation must be construed in a way that corresponds with Parliament's clear intention that an APN based on a regulation 80 determination should be effective to ensure the counteraction of the tax advantage as determined by HMRC.

The UT also had to consider whether the company had a Reasonable excuse for non-payment of the penalties on the basis that it objectively believed that the APN’s were procedurally invalid. Although it was found, on the specific facts, that it did not, the UT did determine that such a belief could be a reasonable excuse in respect of an APN in some circumstances. This point was not raised again at the Court of Appeal.

Useful guides on this topic

Accelerated Payments & Follower notices 
What are Accelerated Payments and Follower notices? What action is required? What are the penalties for non-compliance? Is there a right to appeal?

DOTAS: Disclosure of Tax Avoidance Schemes
What are the on Disclosure of tax avoidance schemes (DOTAS) rules? When should you disclose your use of a tax avoidance scheme? What are the consequences of non-disclosure? How are penalties calculated?

How to appeal a tax penalty (subscriber version)
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Recovery of PAYE: Regulation 80 and 72 assessments for PAYE
When can HMRC assess an employer or an employee for unpaid Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs)? What is a regulation 80 determination? What is a regulation 72 determination? Who is assessed and what are the conditions?

External link

Court of Appeal: Sheiling Properties Ltd v HMRC [2021] EWCA Civ 1425 

Upper Tribunal: Sheiling Properties Ltd v HMRC [2020] UKUT 0175