UT/2021/000192 - [2024] UKUT 00242 (TCC)

Promotion of efficient collection and recovery and Mr Wood’s agreement to exercise: UBS explains the usual position that the employer is in a good, if not better, position to calculate and pay an employee’s tax does not apply here and that even if HMRC (referring to the redirection criteria in Regulation 72) were not satisfied UBS took reasonable care and/or made the “best estimate than can reasonably be made” then any discrepancy could be recovered from Mr Wood through HMRC amending his SA return given HMRC’s open enquiry into tax year 2016/17. There is, UBS submits, no obvious purpose either in the public interest or in UBS’s or Mr Wood’s interest by HMRC investigating / litigating on two fronts against UBS and Mr Wood on the same issue in relation to income tax for which Mr Wood is liable. Exercising the discretion would mean the burden of the central dispute would revert to Mr Wood. Given it is he who would owe the tax liability in question, UBS could withdraw the Regulation 80 appeal, HMRC could conclude their s9A enquiry against which Mr Wood could, if advised, appeal. That is particularly so given (i) there are no concerns about Mr Wood’s solvency and ability to pay, and (ii) he is in a good position to address the central issues concerning quantification of the tax payable (the hypothetical exercise mentioned above of valuing, as at 2002, the future performance of his equity investment team). The case for exercising the discretion is made even stronger as Mr Wood supports its exercise.

Gap in scope of Regulation 72 - As mentioned above, Regulation 72 enables HMRC to redirect the liability from the employer to the employee – see [10] above. UBS argues it is inconsistent, anomalous and unfair that the Regulation 72 redirection provisions do not apply where, as here, the obligation is to account for tax rather than deduct tax, it being happenstance that the payment here, a “notional” payment, is made at a time when no actual payment was made from which UBS could make a deduction.

Exercising power would be entirely consistent with the purpose of the 7A discretion As made clear by the Court of Appeal in Hoey, HMRC are able to use the 7A discretion as a separate and free-standing tool provided the criteria for its exercise are met. The question is simply whether HMRC are satisfied it would be unnecessary or inappropriate for the payer to comply with the PAYE Regulations.