[2025] UKUT 00278 (TCC)

Where it appears to HMRC that an employer may have collected insufficient income tax through PAYE, HMRC may determine the amount of tax and serve a notice of that determination on the employer: Regulation 80(1) and (2) of the Income Tax (Pay as You Earn) Regulations 2003. In the remainder of this judgment, we will refer to this as a Regulation 80 determination.

A Regulation 80 determination may extend to the whole of the tax or to such part of it as is payable to a class or classes of employees specified in the determination, or one or more named employees specified in the determination: Regulation 80(4).

Pursuant to Regulation 80(5), a Regulation 80 determination is subject to certain parts of the Taxes Management Act 1970 (TMA 1970) as though it were an assessment to tax. Those include the provisions set out in (4)–(12) below.

An assessment to tax (other than a self-assessment) must normally be made within four years of the end of the tax year to which it relates: s. 34(1) TMA 1970. Tax payable by virtue of such assessment is normally due within 30 days of the date: s. 59B(6) TMA 1970.

S. 31(1)(d) TMA 1970 provides a right of appeal against any assessment to tax which is not a self-assessment. That appeal is initiated by sending written notice of the appeal to HMRC within the time specified in s. 31A.

Once a notice of appeal has been given to HMRC, HMRC may offer a review or the taxpayer may request a review (this is sometimes referred to as a “statutory review”). The taxpayer may also notify the appeal to the First-tier Tribunal (Tax Chamber) (FTT): s. 49A TMA 1970.

When a statutory review is requested by the taxpayer or offered by HMRC, HMRC must provide its “view of the matter in question”. “Matter in question” is defined in s. 49I as “the matter to which an appeal relates.” In the case of a review requested by the taxpayer, the “view of the matter” must be provided within a specified period from receipt of the request. In the case of a review offered by HMRC, the “view of the matter” must be provided along with the notification of the offer of review: ss. 49B and 49C TMA 1970.

If HMRC offers a statutory review of the assessment and the taxpayer accepts that offer, HMRC must then review the matter. If the taxpayer does not accept the offer of a review within the specified period, HMRC’s “view of the matter” is treated as if it were a written agreement for settlement of the matter under s. 54(1), and the taxpayer is not permitted to repudiate or resile from that agreement, unless it notifies an appeal to the FTT: s. 49C(3)–(6) TMA 1970.

If HMRC reviews the matter pursuant to ss. 49B or 49C, the review may conclude that HMRC’s “view of the matter” is to be upheld, varied or cancelled: s. 49E TMA 1970. HMRC’s conclusions are then (again) treated as if they were a written agreement for settlement of the matter under s. 54(1), and the taxpayer is not permitted to repudiate or resile from that agreement, unless it notifies an appeal to the FTT: s. 49F TMA 1970.

If the taxpayer notifies an appeal to the FTT (whether before or after a statutory review by HMRC), the FTT has the power to increase, decrease or uphold the assessment: s. 50 TMA 1970.

If a settlement to uphold, vary, cancel or discharge the assessment is agreed following notice of an appeal to the FTT, but before the appeal is determined, it is treated as if the FTT had determined the appeal in the way provided for in the settlement agreement: s. 54(1) TMA 1970.

Once an appeal has been made by the taxpayer (whether to HMRC alone or notified to the FTT) the taxpayer cannot unilaterally withdraw that appeal; rather, pursuant to s. 54(4) TMA 1970, HMRC can indicate that it is unwilling for the appeal to be withdrawn. If the appeal has been notified to the FTT, and HMRC objects to the appeal being withdrawn on the basis of a case seeking an increase in the amount stated in the original assessment, the FTT is required to determine the matter and may (under s. 50(7) TMA 1970) increase the assessment if it finds that the taxpayer was undercharged in the original assessment: HMRC v CM Utilities [2017] UKUT 305 (TCC).

S. 8(1)(c) of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (TOFA 1999) provides that HMRC may decide whether a person is liable to pay NICs contributions, and if so in what amount. We will refer to this as a s. 8 decision.

A s. 8 decision may be the subject of an appeal to the FTT: s. 11 TOFA 1999.

HMRC may vary a s. 8 decision at any time before the FTT determines an appeal, if it has reason to believe that the decision was incorrect at the time it was made. Where the varied decision supersedes the earlier decision, it takes effect from the date of the change in circumstances which rendered the earlier decision inappropriate: Regulations 5 and 6 of the Social Security Contributions (Decisions and Appeals) Regulations 1999.

While there is no time limit to make or vary a s. 8 decision, a claim by HMRC to recover unpaid NICs is subject to the six-year limitation period provided in s. 9 of the Limitation Act 1980 and (of relevance to Fluid Scotland) the 20-year limitation period in Scotland under the Prescription and Limitation (Scotland) Act 1973. The claim is typically issued in the county court, and pending any appeal against the s. 8 decision proceedings are then adjourned. Such claims are sometimes referred to as protective writs.

If HMRC wishes to amend a county court claim so as to recover an increased amount of NICs, it will need to make an application to amend under CPR r. 17.4(2). It is then a matter of discretion whether the court grants the application.