Spc00681

INCOME TAX – ASSESSMENTS – Appellant asserted that tax had been deducted under PAYE from his earnings – No record of his employers returning the tax to the Commissioners – Appellant directed to pay the tax – assessments issued to recover the unpaid – Appellant adduced no evidence that the tax had been deducted – Assessments upheld – Appeal dismissed.

SPECIAL COMMISSIONERS

	Mr MICHAEL JOSEPH MORAN  	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Special Commissioner: MICHAEL TILDESLEY OBE	 

Sitting in public in London on 28 February 2008

The Appellant did not appear

Barry Williams and Warren Mitchell of the Appeals Unit London & Anglia  HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION
The Appeal
1.	The Appellant was appealing discovery assessments made under section 29 of Taxes Management Act 1970 in the sums of £6,501, £6509.01 and £32,800 for the respective tax years of 1996/97, 1997/98 and 1998/99.
The Dispute
2.	The Appellant claimed in his tax returns to have suffered income tax by deduction from the following employments:
(1)		J Moran Construction Limited: £6,501.60, Year ended 5 April 1997 
(2)		Vector Construction Limited:   £6,509.00, Year ended 5 April 1998 
(3)	   Vector Builders Limited:          £32,800.00, Year ended 5 April 1999
3.	The Respondents contended that the Appellant’s employers did not operate PAYE with the result that the income tax claimed by the Appellant was not deducted at source from his earnings. On 2 August 2002 the Respondents directed under regulation 42(3) of the Income Tax (Employments) Regulations 1993 that the unpaid tax for the said years should be recovered from the Appellant. The Respondents issued the disputed assessments to give effect to the directions dated 2 August 2002.
4.	The Appellant submitted that he should be given credit for the tax deducted from his employments for the tax years in question. The onus was on the Appellant to demonstrate on the balance of probabilities that the said amounts of income tax were deducted from his earnings, and thereby discharge the assessments against him (see Jonas v Bamford (H.M. Inspector of Taxes) [1973] STC 519 and Hurley v Taylor  (H.M. Inspector of Taxes) [1999] STC 1). The Respondents contended that the evidence adduced by the Appellant was insufficient to discharge the burden of proof and in consequence the assessments should be upheld.
The Hearing
5.	The Appellant did not attend the hearing, and failed to put forward a good and sufficient reason for his absence. I, therefore, proceeded to hear the Appeal in his absence in accordance with regulation 16 of Special Commissioners Regulations 1994. In reaching my decision I took account of the following matters:
(1)	The Appellant had been duly notified of the time, date and place of the hearing.  On 23 December 2007 the Respondents effected personal service of the hearing  notice at his last known address, Tall Timbers, Rooks Hill, Loudwater, Rickmansworth, Herts WD3 3EN in accordance with directions issued by John Clark, Special Commissioner, dated 18 July 2007. The Respondents also sent copies of the hearing notice by post to two other potential addresses for the Appellant, 105 Vicarage Road  and 55 New Road. 
(2)	The Appellant has had ample opportunity to supply the Respondents with the required documentary evidence to satisfy them that tax and national insurance contributions were deducted from his remuneration. On 18 March 2002 Miss Winn informed the Appellant that she wished to see documentary evidence in the form of  company payroll records supported by a sample of payslips and personal bank statements. The Appellant has not supplied the documents requested.
(3)	The Appellant did not comply with the directions released 18 July 2007 regarding documents bundle and skeleton arguments.
(4)	The Appellant was fully aware of the details of the Respondents’ case and the evidence they intended to call.
The Evidence 
6.	Miss Alison Winn and Miss Lesley Stoop gave evidence for the Respondents. Miss Winn was involved with the issue of the regulation 42(3) directions. Miss Stoop made the discovery assessments. The Respondents submitted a bundle of documents in evidence.
The Facts
7.	The Appellant was a builder by trade. Between 6 April 1996 and 5 April 1999 he was employed at various times by three companies: J Moran Construction Limited, Vector Construction Limited and Vector Builders Limited.
8.	The Appellant’s self assessment return for the year ended 5 April 1997 showed employment income of £26,844.36 from J Moran Construction Limited with a tax deduction of £6,501 from those earnings. The return also indicated that the Appellant’s employment with J Moran Construction Limited ceased on 5 April 1997.
9.	The Respondent’s computer records indicated that the Appellant’s self assessment return for the year ended 5 April 1998 showed employment income of £28,300 from Vector Construction Limited with a tax deduction of £6,509 from those earnings.
10.	The Appellant’s self assessment return for the year ended 5 April 1999 showed employment income of £82,800.00 from Vector Builders Limited with a tax deduction of £32,800 from those earnings.
11.	On 20 March 2000 the Appellant signed an employer’s annual return (P35) for the year ended 5 April 1999 for Vector Construction Limited in his capacity as director of that company.	The return declared that income tax in the sum of £33,084.00 had been deducted from employment income paid to the Appellant.  The Respondents have accepted the Appellant’s explanation that the return should be from Vector Builders Limited not Vector Construction Limited.
12.	No PAYE tax in respect of deductions from the Appellant’s employment income has been sent to the Respondents by J Moran Construction Limited, Vector Construction Limited or Vector Builders Limited between 6 April 1996 and 5 April 1999. The amount of tax purportedly deducted from the Appellant’s earnings by his employers did not equate with the correct tax calculated under PAYE. 
13.	.On 2 January 2002 the Respondents wrote to Mr Moran informing him that they were about to make directions under Regulation 42(3) of the 1993 Employment Regulations. 	Separate letters were issued in respect of the Appellant’s employment with J Moran Construction Limited, Vector Construction Limited and Vector Builders Limited, setting out in detail the amount of remuneration and tax it was considered each employer had wilfully failed to deduct.  
14.	On 2 August 2002 directions under regulation 42(3) of the Income Tax (Employments) Regulations 1993 were made, directing that the unpaid tax be recovered the Appellant. In making the regulation 42(3) directions, the Respondents’ Authorised Officer concluded that the Appellant received employment income knowing that his employers had wilfully failed to deduct tax according to the 1993 Employments Regulations.  The Appellant was either a director or company secretary of his three employers.
15.	The regulation 42 (3) directions had the effect of making the Appellant’s self assessment returns for the years ended 5 April 1997, 1998 and 1999 insufficient. Regulation 101 (6)  of the 1993 Regulations withdrew the Appellant’s entitlement to credit for tax deducted from employment income that was subject to the direction from his self assessment returns.
16.	On 31 January 2003 and 3 February 2003 Miss Stopp issued discovery assessments under section 29 of the Taxes Management Act 1970 in the sums of £6,501, £6,509.01 and £64,799.99 for the years ending 5 April 1997, 1998 and 1999 to give effect to the regulation 42(3) directions.
17.	Miss Stopp considered that the requirements of section 29 of the 1970 Act had been met in the Appellant’s case. First, the Appellant’s assessment to tax had become, insufficient as a result of the regulation 42 (3) directions which withdrew the credit for tax deducted declared in his self assessment returns. Second, she could not reasonably expected to believe on the information available to her at the time the enquiry window closed under section 9A of the Taxes Management Act 1970 that the Appellant’s assessment to tax for the years in question would be insufficient.
18.	The Appellant supplied payslips from Vector Construction Limited purporting to show deduction of tax by PAYE for the period from 1 April 1997 to 31 March 1998. The Appellant did not supply the documentary evidence requested by Miss Winn in her letter of 18 March 2002 of company payroll records and personal bank statements for each of the years in question.
Reasons for Decision
19.	My decision is concerned solely with the Appellant’s appeal against the discovery tax assessments for the years ending 5 April 1997, 1998 and 1999. The Appellant had no right of Appeal against the issue of the regulation 42(3) directions. The employee’s right of Appeal against a regulation 42(3) direction under regulation 72B of Income Tax (Pay As You Earn) Regulations 2003 came into force on 12 April 2004 which was after 2 August 2002, the date when the regulation 42(3) directions were issued against the Appellant.  
20.	The Appellant’s grounds of appeal against the assessments were that he should be given credit for the tax he suffered from his employment with the three companies,  and that he did not receive any earnings from Vector Construction in the year ended 5 April 1999. 
21.	The Respondents conceded that the Appellant received employment income only from Vector Builders Limited during the year ended 5 April 1999. Their concession had the effect of reducing the original assessment for the year ending 5 April 1999 from £64,799.99 to £32,800.00.
22.	I find as fact that no PAYE tax in respect of deductions from the Appellant’s employment income had been sent to the Respondents by J Moran Construction Limited, Vector Construction Limited or Vector Builders Limited between 6 April 1996 and 5 April 1999. In the light of that finding the onus was on the Appellant to demonstrate on the balance of probabilities that the said amounts of income tax as declared in his self assessment returns for the years in dispute were deducted from his earnings. The Appellant chose not to attend the hearing to give oral evidence. Further he did not comply with Miss Winn’s request of 18 March 2002 for company payroll records and personal bank statements for each of the years in question The only documents produced by the Appellant to support his contention that tax was deducted from his earnings were copies of payslips from Vector Construction Limited for the period from 1 April 1997 to 31 March 1998.  I place no weight on the information contained in the payslips because the information on its own did not demonstrate that tax had been deducted from his earnings. I, therefore, find that the Appellant has failed to satisfy me on the balance of probabilities that he should be given credit for the tax he alleged was deducted from his employment earnings with the three companies for the years in question.
23.	I am satisfied that the Respondents met the requirements of section 29 of the Taxes Management Act 1970 enabling them to issue discovery assessments for the years ending 5 April 1997, 1998 and 1999. 
Decision
24.	In view of the above reasons I dismiss the Appellant’s appeal and uphold the assessments made under section 29 of Taxes Management Act 1970 in the sums of £6,501, £6509.01 and £32,800 for the respective tax years of 1996/97, 1997/98 and 1998/99.

                                          
                                        MICHAEL TILDESLEY OBE
       SPECIAL COMMISSIONER
        RELEASE DATE: 16 April 2008

SC 3069/2005