Whose Liability is it anyway? – Sparrey [2014] TC 03940

In a recent case the tax payer, a Mr Sparrey proved he did not need to pay HMRC for an agreed tax underpayment.  This was because as a PAYE liability, prima facie, the tax should have been accounted for by the employer.

The Tribunal found that the employer and their payment agent did not take reasonable care, so HMRC should not have directed the tax to be collected from the individual taxpayer.  The latter had depended upon his employer to calculate the tax correctly and should not be penalised for their lack of care.

This case was not directly to do with Extra Statutory Concession A19, but it was mentioned, and may be of interest to those still arguing on past liabilities.

A number of underpayments we have seen have resulted from the misapplication of PAYE procedures by the employer.  This new case emphasises that, in those circumstances, HMRC have very limited powers to transfer liability to an individual employee, away from the employer.

It may also provide food for thought on other arguments where HMRC seek recompense from individual employees which may fall more aptly on the corporate body.

Transfer of liability to an individual may occur where (Reg 72 Income Tax (PAYE) Regs 2003 – SI 2003/2682).  The employer satisfies HMRC:

a)     That they took reasonable care and

b)    That the error to fully deduct was made in good faith

Or alternatively:

That the employee received the monies knowing that the employer had wilfully failed to deduct the amounts due.

Crucially, the employee has the right of appeal against an HMRC direction, so swift action and expert advice may be required.

ESC A19 – The Changing Nature of P14s and Relevant Information

Extra statutory concession A19 (ESC A19) is available to taxpayers in certain situations where tax has not been correctly collected under PAYE and as a result the taxpayer has underpaid tax.

Broadly speaking the taxpayer is not required to pay the outstanding tax liablility where it can be shown that sufficient time has passed and HMRC had ‘relevant’ information to determine that the additional tax was due.

In determining what constitutes ‘relevant’ information for the purposes of ESC A19, HMRC guidance states that the end of year reconcilliations submitted by employers for each employee in a tax year (known as form P14), do not constitute relevant information.

However a recent freedom of information request by Keith Gordon (a barrister from Atlas Chambers) has discovered that HMRC’s guidance prior to well publicised errors with it’s system, found that P14’s were treated as relevant information (ESCapology, Taxation Issue 4376).

Despite the current assertion that P14s are not relevant information, Eaves & Co were recently able to successfully argue that a P14 did constitute relevant information which resulted in our client successfully having ESC A19 applied.

From speaking to other advisors this success may however be a one off as HMRC seem to be denying P14s as relevant information in most instances where ESC A19 is being sought.

The consulation for the revision of the conditions of ESC A19 has now closed with Eaves & Co submitting a response, in particular making a point for P14s to be included as relevant information. However we will wait and see the outcomes of this consultation and provide an update in due course.

ESC A19 – No Tribunal

The First Tier Tax Tribunal decided in the case of Prince & Others v HMRC that it had no jurisdiction over the application of ESC A19.

It was heard that the application of an extra statutory concession is governed by public or administrative law, and therefore this case needed to be settled through a judicial review.

The taxpayers’ appeals were struck out and we must now see whether a judicial review goes ahead.

Further to this, it appears that should an individual have an issue with how ESC A19 is applied to a particular case, then they should address their complaints to the Adjudicators Office. Following recent literature regarding the subject it appears that they have dealt with complaints regarding HMRC not taking into account exceptional circumstances in the application of ESC A19.

With this in mind, it appears to mean that as the Adjudicators Office  have looked into complaints in at least one case,  then they should be able to deal with others.

Call our Leeds office on 0113 2443502 for an initial conversation

Changes Proposed to ESC A19

Under the current concession taxpayers that have outstanding tax are able to apply to use ESC A19. This concession writes off the amount owed if the taxpayer can show that HM Revenue & Customs failed to use information at their disposal in a timely manner.

Under the proposed changes taxpayers would be deemed to have a basic level of knowledge and understanding of their own tax affairs. Also, if the taxpayer believes there is an error relating to their tax affairs they would be expected to contact HM Revenue & Customs without delay.

This also brings into question whether there should be a time limit on using the concession as taxpayers have to take ‘personal responsibility’ in making sure their tax affairs are correct.

The proposals are currently under consultation and Eaves & Co are to provide a response as we have successfully assisted clients in claiming under ESC A19 on a number of occasions.

In practice these proposed changes would appear to make it more difficult for taxpayers to make a claim under concession ESC A19 as there is more onus on the taxpayer to make sure their affairs are correct.

ESC A19 – No Tribunal

The First Tier Tax Tribunal decided in the case of Prince & Others v HMRC that it had no jurisdiction over the application of ESC A19.

It was heard that the application of an extra statutory concession is governed by public or administrative law, and therefore this case needed to be settled through a judicial review.

The taxpayers’ appeals were struck out and we must now see whether a judicial review goes ahead.

ESC A19 Success!

Eaves & Co are pleased to announce that HM Revenue and Customs have agreed to allow a claim drafted by us for ESC A19 in relation to 2007/08, 2008/09 and 2009/10 saving our client £5,653.68.

We successfully argued that HM Revenue and Customs should have taken into account information provided in the employer end of year return when determining our clients PAYE code for the relevant year.

If you have receieved a notice of underpaid tax through the PAYE scheme and believe ESC A19 may apply to your circumstance please contact Eaves & Co on 0113 244 3502.

ESC A19 – New Clients

We are pleased to mention that we have engaged with another individual to assist them with a claim for ESC A19.
If you have received a bill from HMRC for past years PAYE and feel agrieved then please email or call us for a no obligation initial conversation on 0113 2443502.
Eaves & Co’s approach is to robustly represent our clients if we feel a case can be made in order to achieve success.

Our experience is that HMRC are doing as promised by not asking for tax prior to 6 April 2007.  However,  whether annual P14s are classed a “relevant information” could be key in the absence of P46s or correspondence for tax coding purposes.

We are pleased to announced that our first ESC A19 success came through in July 2011, saving our client over £5,000 in tax.

ESC A19 – Update

 According to the Daily Telegraph, 23% of those who appealed against tax demands issued in 2010 using extra statutory concession A19 were successful.

Some 250,000 pensioners have also had potential tax liabilities waived under the concession.

So it is clear that A19 is being widely used and with some success.

If you have any problems with under payment or believe a tax refund might be due please contact Eaves and Co, Leeds.

Eaves & Co are pleased to announce their first success for ESC A19 saving our client over £5,000 in tax.

ESC A19 – HMRC Acting Late

2010 saw HMRC in a high profile exercise to gain more tax from individuals in the PAYE system.

There is evidence of assessments now being raised by them in order to claw back tax which the PAYE system hasn’t managed to collect.

If you receive a bill now, then a couple of checks are relevant:-

1) Is the assessment correct, based on your actual income and reliefs for the tax year in question
2) Is it possible for a review to be requested under ESC A19, that HMRC acted on information too late

We dealt with a case recently where HMRC acted late on receipt of form P46 from the individual’s employer.

Call Eaves & Co on 0113 2443502 for a free initial consultation