G5: PAYE and NICs decisions

- But query whether sufficient if correspondence makes clear the intended class

"[109] These criticisms must be dismissed purely on the basis of ESL’s own acceptance in its notice of appeal. The words in the notice (read in the context of the heading) put forward the class of persons namely those in respect of whom unallowable expenses have been claimed. The correspondence, in our view, falls into the category of informing the words used in the notice rather than substituting those words.

[110] The words viewed in isolation, are (as is implicit in the FTT decision) insufficient to specify a class. But to the extent that the formulation raises any ambiguities as to the expenses and persons covered these are clearly resolved once those words are informed by the correspondence accompanying the notice. From the 26 February 2018 letter it is plain:

(1)         the expenses are not all expenses but those relating to travel and subsistence (the letter specifically referred to those).

(2)         The relevant persons are not all employees but those construction workers who work on assignment (the letter referred to HMRC not considering that “workers engaged by [ESL] [had been attending temporary workplaces] and to HMRC viewing the travel expenses as constituting “ordinary commuting”. Contrary to Mr Goodfellow’s arguments in reply we do not consider the points being made in the letter to be capable of capturing permanent staff based in the head office. There was no reason to suppose any dispute arose regarding such permanent head office staff attending temporary workplaces. There would have been no dispute about their employment status or any reason to refer to such staff as “workers engaged by ESL” (which phrase would most naturally apply to the construction workers on assignment). From all of this it would be abundantly clear HMRC were not targeting travel expense claims by staff based at the head office,

(3)          the class of employees was not ambiguous as to whether it only covered employees working one assignment or more as HMRC went on to say that for the avoidance of doubt it considered each period of employment to be a separate period of employment." (Exchequer Solutions Ltd v. HMRC [2024] UKUT 25 (TCC), Flaux J and Judge Raghavan)

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However extraneous evidence may only be relevant to s.114

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"[120] Although this ground of appeal is resolved on the basis of the appellants’ acceptance of the relevant legal principles, we do have some reservations about whether it is correct. We have no doubt the Regulation 80 determinations were valid but for our part the basis for this is the operation of s114(1). We take that view because both in Donaldson and Archer recourse to the wider correspondence was not undertaken when considering whether the notices complied with the relevant legislative requirements in the first place but only when considering the application of s114(1). We recognise that in Archer Lewison LJ’s reasoning distinguished the question of whether an assessment had been amended with interpretation of words. The issue here is not amendment but specification of class. We think there is a closer analogy here with the analysis in Donaldson where the penalty notice did not, as the legislation required state the period in respect of which the daily penalty was assessed. It was accepted, as became clear when the Court moved on to consider s114(1), that the recipient could work out that period from other information that had been provided. However, that was not sufficient to fulfil the requirement that the period be “stated”. In line with that approach and the similarity between “state” and “specify”, in the absence of the appellant’s acceptance, and had it been necessary to consider whether the determinations had adequately specified a class, we consider that specification ought to have been apparent from the face of the Regulation 80 determination. In that regard we agree with the FTT’s analysis of Regulation 80(4) in Trowbridge with the proviso that such specification could incorporate other documents by specific reference. Extraneous correspondence would thus only become relevant at this stage of the analysis if specifically incorporated by reference. The omission to specify a class on the face of the Regulation 80 determination would not of course render the determination invalid unless it fell outside the scope of s114(1), which as Archer makes clear does entail examining the knowledge of the taxpayer and adviser." (Exchequer Solutions Ltd v. HMRC [2024] UKUT 25 (TCC), Flaux J and Judge Raghavan)

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