Taxpayer’s entitlement to credit for PAYE deductions

The taxpayer was a contractor who was employed by two offshore entities to provide services to various UK businesses. The employers paid him a minimum wage and contributed to an employee benefit trust (EBT) which made loans to him.

HMRC considered the taxpayer was liable to pay the tax on the loans because it could not collect the tax from the employers since they were offshore. The department therefore exercised its discretion under ITEPA 2003 s 687(7A) to transfer the PAYE tax burden from the employers to the taxpayer. It then issued discovery assessments for 2008-09 and 2009-10. As an alternative it said a charge to tax arose under the transfer of assets abroad legislation (ITA 2007 Pt 13 ch 2).

The First-tier Tribunal held that it had no jurisdiction to consider the PAYE issue but that HMRC had discretion to disapply PAYE in any event...