In Stephen Hoey & Ors v HMRC [2022] EWCA Civ 656, the Court of Appeal agreed that no PAYE credit was available for payments made to an Employee Benefit Trust. The courts had no jurisdiction to challenge HMRC’s discretion in not pursuing a deemed employer for PAYE and the appellant’s judicial review claim failed.

Mr Hoey participated in two contractor loan schemes, whereby he received loans from offshore Employee Benefit Trusts (EBTs).

The First Tier Tribunal (FTT) and Upper Tribunal (UT) both dismissed Mr Hoey’s appeals. The FTT said it did not have jurisdiction to interfere with whether or not HMRC had property exercised their discretion, and the UT agreed.

Mr Hoey appealed the decision of the UT and also issued a claim for judicial review of HMRC’s decision not to collect tax on his employment earnings from the End Users.

The Court of Appeal (CoA) dismissed My Hoey’s appeals.

HMRC had alternatively sought to tax Mr Hoey under the Transfer of Assets Abroad (TOAA) legislation.

The Court of Appeal agreed with the UT. There was no income for the purposes of the ToA rules which Mr Hoey could in principle have had the power to enjoy.

On the cross-appeal, the CoA also agreed with the UT finding that the FTT was entitled to reach the conclusion that it and they could find no material error of law in its approach or reasoning.

The UT had found, agreeing with HMRC, that any charge under the ToA legislation would take priority over any liability to tax under the employment income provisions of ITEPA. The CoA could not see on what basis HMRC made this assertion stating that it would be an extraordinary position to reach given the highly complex and potentially penal provisions of the ToA code and the possibility that it would result in double taxation. Since HMRC conceded this point during the CoA hearing the court did not have to conclude on the matter.

Useful guides on this topic

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

Disguised Remuneration Zone
how to settle up with HMRC in respect of any pay that has been disguised as loans 'disguised remuneration' and includes contractor loans and Employee Benefit Trust loans. 

How to appeal a decision of HMRC
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Transfer of Assets Abroad 
What are the ToA rules? When do they apply? Is there any defence against the rules?

Regulation 80 and 72 assessment for PAYE
When HMRC can assess a company or its owners for failure to deduct PAYE and NICs

External link

Stephen Hoey & Ors v HMRC [2022] EWCA Civ 656 

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