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Taxpayer wins appeal against HMRC after receiving contradictory tax demand

04 August 2016. Published by Alexis Armitage, Senior Associate

In Walkers’ Baggage Transfer Company Ltd v HMRC [2016] UKFTT 0415 (TC), the First-tier Tribunal (FTT) has allowed the taxpayer's appeals and concluded that the appellant had accounted for the PAYE properly due in relation to one of its employees over a three year period.



Walkers’ Baggage Transfer Company Ltd (the taxpayer), is in the business of providing transport for the luggage of holiday-makers exploring on foot Hadrian's Wall and employs a number of drivers for this purpose.


HMRC alleged that the taxpayer had not accounted to HMRC for the PAYE properly due in relation to one of its drivers, Mr Roger Thurstan. The taxpayer disagreed and maintained that it had operated PAYE correctly and had followed the directions issued to it by HMRC.


Nonetheless, HMRC issued determinations and decisions to the taxpayer for the alleged tax due under PAYE for the tax years 2010/11, 2011/12 and 2012/13.


The taxpayer appealed against the determinations and decisions. 


FTT’s decision

The taxpayer produced in evidence a witness statement from the driver concerned, Mr Thurstan, as well as certain documentation in support. In particular, the taxpayer sought to rely on a letter dated 9 January 2016 that Mr Thurstan had received from HMRC that stated:

"I believe your employer operated Pay As You Earn (PAYE) correctly using the information they had at the time. This means that I will not be asking your employer to pay the £727.80 tax due".

When hearing this evidence, the FTT, not surprisingly, concluded that there was a clear conflict between HMRC's Statement of Case, in which it was claimed that additional tax was due in relation to Mr Thurstan and the letter HMRC had written to Mr Thurstan confirming  that no additional tax was due. As a result, the FTT thought it appropriate to adjourn the hearing to enable HMRC to "consider the implications of the letter" and to seek further instructions as appropriate.

After a short adjournment, the hearing resumed and HMRC indicated that they no longer resisted the taxpayer's appeals. The FTT accordingly allowed the taxpayer's appeals.


In the circumstances, the outcome of the appeal is not surprising. What is of concern is that this case ever made it as far as the FTT in the first place.

It must have been clear to HMRC from an early stage in the appeal process that there was an obvious "conflict" between the determinations and decisions issued by HMRC, claiming that additional tax was due in relation to Mr Thurstan and the letter it had previously written to Mr Thurstan, confirming that no additional tax was due.

The taxpayer in this case was no doubt put to a great deal of  inconvenience and expense in bringing its appeals to the FTT, appeals which should not have been necessary. Given the unreasonable conduct of HMRC in defending the appeals for as long as it did, the taxpayer would have been justified in seeking a costs order against HMRC pursuant to Rule 10 of the Tribunal Rules. HMRC can consider itself fortunate that the taxpayer does not appear to have sought such an order in this instance. Should HMRC behave in a similar manner in future cases, it may well find itself penalised in costs.

A copy of the decision can be found here.