Key Facts
- •Janet Bray Limited (JB Ltd) appealed two PAYE determinations and penalties for 2009/10 and 2010/11 totaling £210,768.85 and £42,828.25 respectively, arising from a tax scheme.
- •The scheme used an offshore employee benefit trust (EBT) to provide tax-free amounts to employees.
- •The Supreme Court's decision in Rangers (2017) rendered the scheme ineffective.
- •JB Ltd argued that there was no carelessness justifying the extended time limit for assessments and that any carelessness did not cause the tax loss.
- •JB Ltd's director, Janet Bray, relied on her accountant and a tax scheme provider, believing she didn't need to understand the tax mechanisms.
- •The scheme involved a Jersey company (HERS) providing an evaluation and recommending reward via the EBT, with payments ultimately loaned to employees.
- •Clavis, engaged by JB Ltd, explicitly stated in their engagement letter that they were not providing tax advice.
- •Neither JB Ltd nor Ms Bray sought independent tax advice.
Legal Principles
Carelessness involves a factual assessment considering all circumstances, judged against a prudent and reasonable taxpayer.
Hicks [2020] UKUT 12 (TCC), Collis [2011] UKFTT 588 (TC)
Regulation 80 of the PAYE Regulations 2003 allows HMRC to determine tax payable if it appears tax has not been paid or certified.
PAYE Regulations 2003, Regulation 80
Section 36 TMA 1970 extends the time limit for assessments to six years if a tax loss is carelessly brought about.
Taxes Management Act 1970, s36
Schedule 24 FA 2007 provides for penalties if a return contains an inaccuracy leading to an understatement of tax liability due to a failure to take reasonable care.
Finance Act 2007, Schedule 24
Outcomes
Appeal dismissed; determinations and penalties upheld.
The Tribunal found JB Ltd acted carelessly by failing to obtain independent tax advice before entering into the scheme, despite warnings in the engagement letter and presentations. This carelessness caused the tax loss.