Phillip Brian Higgs & Ors v The Commissioners for HMRC

Under the doctrine of precedent, the Upper Tribunal is bound by a Court of Appeal decision determining the same issues where the decision cannot be distinguished. It cannot rehear the arguments de novo or decide that the Court of Appeal was wrong.

The First-tier Tribunal’s jurisdiction is statutory. It does not extend to determining entitlement to PAYE credits under Regulations 185 and 188 of the Income Tax (PAYE) Regulations 2003 for sums which end users were liable to deduct. Those provisions operate at the collection stage and do not alter the amount of tax chargeable or payable under the assessment legislation.

The appellants were users of a marketed tax avoidance scheme involving offshore employment arrangements, minimum wage payments and purported employee-benefit-trust loans. Before the First-tier Tribunal, they sought to argue that they were entitled to PAYE credits for income tax which, they contended, should have been deducted by parties in the contractual chain.

The First-tier Tribunal decided that it had no jurisdiction to determine whether PAYE deductions were required or whether the appellants were entitled to corresponding credits. The appellants appealed on issues concerning PAYE credits, the scope and retrospectivity of the power under section 684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003, and the effect of that power on other payers.

Before this appeal was heard, the Court of Appeal had determined materially identical issues in Hoey v The Commissioners for HM Revenue and Customs [2022] EWCA Civ 656. The central issue was whether the Upper Tribunal was bound by that decision.

1. Appeal dismissed. The appellants accepted that the Court of Appeal in Hoey v The Commissioners for HM Revenue and Customs [2022] EWCA Civ 656 had determined the same issues against them and that the decision could not be distinguished.
2. The doctrine of precedent required the Upper Tribunal to follow the Court of Appeal’s decision. It was not open to the Upper Tribunal to rehear the arguments de novo, conclude that the Court of Appeal was wrong, or provide a reasoned reconsideration of criticisms directed to that decision. The appeal could therefore be disposed of without separately determining each permitted ground.
3. The Court of Appeal’s conclusions, which were binding, established that the First-tier Tribunal is a statutory tribunal created by section 3 of the Tribunals, Courts and Enforcement Act 2007. It has no inherent High Court jurisdiction to determine common-law public-law arguments.
4. The PAYE Regulations do not impose liability to tax on employment income. Liability is fixed by the Income Tax (Earnings and Pensions) Act 2003. Regulations 185 and 188 of the Income Tax (PAYE) Regulations 2003 operate at the collection stage. They do not affect the amount of tax chargeable or payable under sections 8, 9 or 29 of the Taxes Management Act 1970, and entitlement to the PAYE credit therefore falls outside an appeal under section 31 of that Act.
5. The Court of Appeal had also held that the section 684(7A)(b) power was capable of operating prospectively and retrospectively, and that neither the First-tier Tribunal nor the Upper Tribunal had jurisdiction to review its exercise. The Upper Tribunal was bound by those conclusions and declined to address the appellants’ renewed arguments.
6. Any application for costs had to be made in writing within seven days under Rule 10(5)(a) and (6) of the Tribunal Procedure (Upper Tribunal) Rules 2008.

• Upper Tribunal (Tax and Chancery Chamber): The present appeal was dismissed.
• First-tier Tribunal (Tax Chamber): The preliminary issues were decided against the appellants. The Tribunal held that it had no jurisdiction to determine the PAYE-credit questions.
• Court of Appeal: In Hoey v The Commissioners for HM Revenue and Customs [2022] EWCA Civ 656; [2022] 1 WLR 4113, the Court held that the First-tier Tribunal lacked jurisdiction to determine entitlement to PAYE credits under Regulations 185 and 188 and could not review the exercise of the section 684(7A)(b) power.