Payeworx Limited, R (on the application of) v The Commissioners for HMRC

For the purpose of publishing information under section 86(1) of the Finance Act 2022, suspicion is a low threshold. A structure under which PAYE is operated on less than the worker’s full receipts may rationally support suspicion that obtaining a tax advantage is one of its main purposes.

The suspected tax advantage need not ultimately be legally effective. Avoiding or deferring a tax charge may suffice under section 234(3) of the Finance Act 2014. Publication under section 86 is not disproportionate under A1P1 merely because it may affect a business’s goodwill. An ordinary exercise of the statutory power, without unusual or oppressive features, is not arguably unlawful.

Payeworx supplied workers to third-party clients. The workers were paid a salary through Payeworx subject to PAYE, while their personal service companies received larger payments from an Isle of Man protected cell company, described as dividends and not subject to income tax or NICs.

HMRC decided to publish information about the arrangements under section 86(1) of the Finance Act 2022. Swift J refused permission on the papers, and Lang J had previously refused interim relief. On renewal, Payeworx pursued irrationality and A1P1 grounds. The central questions were whether HMRC could rationally entertain the statutory suspicion and whether publication arguably violated Payeworx’s A1P1 rights.

1. Permission refused. Neither ground was arguable.
2. Section 86(1) required only suspicion. That was a low threshold, properly described as a state of conjecture or surmise where proof was lacking, as illustrated by Shaaban bin Hussien v Chung Fook Kam [1970] AC 942. Operating PAYE on less than the full amount received by a worker was itself a rational ground for suspicion. It was obvious that structuring remuneration in that way could be intended to obtain a tax advantage within the broad definition in section 234(3) of the Finance Act 2014.
3. Payeworx’s later reliance on clients wishing to avoid IR35 notices strengthened, rather than dispelled, the suspicion. Avoiding an IR35 notice could at least defer a tax charge and therefore constitute a tax advantage. It was only marginally relevant whether the arrangements ultimately produced an effective tax benefit. An expectation that a benefit might result was distinct from the legal conclusion that it did or did not accrue.
4. The A1P1 challenge also failed. Even assuming that Payeworx’s goodwill or another relevant right constituted a possession, publication did not realistically violate its enjoyment. The statutory scheme itself was not disproportionate. There were no unusual or oppressive features in this case capable of making the particular exercise of the power unlawful. The approach was consistent with R (Vision HR Solutions Ltd) v HMRC [2023] EWHC 1659 (Admin) and R (Easyway Umbrella Ltd) v HMRC [2023] EWHC 3368 (Admin).
5. HMRC’s contention under section 31 of the Senior Courts Act 1981 did not require determination. Payeworx was ordered to pay HMRC’s costs of £6,201.20, subject to any further written representations and consequential costs directions.

• High Court (Administrative Court): Swift J refused permission on the papers on 2 April 2024. On renewal, Mr Justice Kerr refused permission on both grounds under Finance Act 2022 section 86.
• High Court (Administrative Court): Lang J previously refused Payeworx’s application for interim relief.