The Commissioners for HMRC v Moir Management Services Limited

This proceeding is an application by the Applicants (“HMRC”) to the Tax Chamber of the First-tier Tribunal (“FTT”) for penalties under Section 98C(1)(a) and (2)(a) of the Taxes Management Act 1970 (“TMA 1970”) to be imposed upon the Respondent (Moir Management Services Limited (“Moir”)) for what is said to be its failure to notify “notifiable arrangements”, and its failure to respond to a pre-disclosure enquiry notice.

The issues to be decided by the FTT in this application are:

The onus of proof is on HMRC to satisfy the FTT that Moir was a promoter of notifiable arrangements, and (if so) that it failed to comply with its obligations.

If the FTT is satisfied of both of those aspects then the onus is on Moir to satisfy me that it had a reasonable excuse for its non-compliance.

If Moir does not satisfy the FTT that it had a reasonable excuse then the onus is on HMRC to satisfy the FTT as to the quantum of the penalty.

The burden in all aspects is the civil standard of the balance of probabilities.

Before considering the substantive application, there is a procedural point to be noted.

On 3 June 2024, the FTT issued an Unless Order which warned that, unless Moir filed an adequate Amended Statement of Case within 30 days, Moir’s original Statement of Case would be struck out. On 21 October 2024, Judge Fairpo confirmed that Moir’s Statement of Case was struck out. Judge Fairpo invited HMRC to make an application for their substantive application to be considered on the papers, which they duly did.

On 13 March 2025, the FTT invited Moir to comment on whether it wished to have an oral or paper hearing. On 25 March 2025, Moir sent a letter to the FTT, enclosing:

This response was evidently understood to be Moir’s consent to a paper hearing as, on 28 April 2025, HMRC’s application for a paper hearing was granted by Judge Sinfield.

I need to decide to what extent the documents submitted by Moir under cover of their letter of 25 March 2025 (and earlier documents Moir submitted) should be taken into account. Moir’s Statement of Case has been struck out and so will not be considered.

When deciding whether to take into account the other documents submitted by Moir, I note that if Moir had been barred then Rule 8(8) of the Tribunal Procedure (First-tier tribunal) (Tax Chamber) Rules 2009 would apply. This provides:

In Alpha Republic Limited v HMRC [2023] UKFTT 750 (TC), the Appellant had argued that HMRC’s Statement of Case was deficient. In pre-hearing correspondence, Judge Sinfield had written to the Appellant:

That correspondence suggests that Judge Sinfield understood that the effect of striking out a respondent’s case to be the same as, or similar to, barring that respondent. However, I bear in mind that this apparent understanding was conveyed in correspondence, written to elicit representations; it was not a formal decision. Judge Sinfield’s letter was also written against the background of the Appellants in that case having also applied for a barring order. I do not consider Judge Sinfield would necessarily have intended correspondence that was intended to progress the parties to hearing, to be his definitive opinion on this point.

Here, I consider it relevant that the Unless Order did not warn Moir that it would be barred as a consequence of non-compliance. In addition, when confirming Moir’s Statement of Case had been struck out, Judge Fairpo did not state that Moir was barred from taking any further part in these proceedings. Most relevantly, the fact that Judge Fairpo invited Moir to express a view on whether this hearing should be a paper hearing suggests that Judge Fairpo considered Moir was still able to take part in these proceedings, despite having struck out Moir’s Statement of Case.

I have concluded that the effect of striking out a respondent’s case is more limited in the FTT than the consequences of barring a respondent. Although this amounts to a relatively limited restriction on a respondent, I have concluded that the consequence of having its Statement of Case struck out in the FTT is simply that the respondent can no longer rely on that Statement of Case, and so is unable to rely on new points pleaded. While a Statement of Case contains a respondents’ pleadings (and in the higher courts the striking out of a Statement of Case would often be fatal to a party’s case) the only logical interpretation of events here is that, in the FTT, such a respondent is not barred from taking part in proceedings. There is nothing in Judge Fairpo’s Unless Order, or subsequent confirmation, to suggest Moir is not entitled to rely upon other documents and the evidence submitted to respond to the case made by HMRC.

Moir has stated that it wishes to rely upon the documents it submitted on 25 March 2025. Other than the Statement of Case, this is three pieces of correspondence between Moir (or its director) and HMRC. While these three letters were received late by the FTT, they are relevant to these proceedings and so should be admitted unless there is a compelling reason to not admit them. This correspondence does not take HMRC by surprise, and HMRC were aware that Moir wished to rely upon these three letters several weeks before HMRC filed their written submissions. I have decided that it would be appropriate for me to take into account the three letters, but not the struck out Statement of Case, when making this decision.

The evidence before the FTT consists of the witness statement of HMRC Officer James Bontempo dated 11 January 2023, a 1,101 page documents bundle containing the exhibits to Officer Bontempo’s witness statement, a 554 page authorities bundle, and correspondence on the FTT file, including the three letters filed by Moir on 25 March 2025.

I accept the evidence contained in the witness statement of Officer Bontempo.

The exhibits to Officer Bontempo’s witness statement relate to a sample of nine (unrelated) individuals who participated in the arrangements under consideration, and additional material created or discovered as a result of HMRC’s investigations.

Moir was incorporated on 28 January 2005. Its first director was Mr Craig Moss and its first company secretary was Ms Deanna Moss. Mr Craig Moss was a director until November 2010. Mr Anthony Moss was director from November 2010 until November 2011. Mr Craig Moss was again director from November 2011 until March 2019. Ms Monica Varo was director from March 2019 until May 2020. Mr James Moss has been director of Moir since May 2020.

Immediately upon Moir’s incorporation, Mr Craig Moss was the sole shareholder. On an unknown date Ms Deanna Moss became the majority shareholder in Moir, with a shareholding of more than 75% of the shares. In March 2019, Ms Varo became the majority shareholder, holding more than 75% of Moir’s shares. Although she resigned as director in May 2020, Ms Varo remains the majority shareholder.

On an unknown date the arrangements described below came to HMRC’s attention, and HMRC subsequently began an investigation.

On 11 December 2020, HMRC wrote to Moir setting out HMRC’s understanding of the arrangements and asking Moir either to make a voluntary disclosure via form AAG1, or to explain why Moir was not liable to notify the arrangements. No response was received. On the same date, HMRC also wrote to Jarvis International Limited (“Jarvis”), whose role is set out below, but no response was received.

On 18 January 2021, HMRC wrote to Moir with a formal notice under Section 313A FA 2004, requiring a response by 17 February 2021. No response was received.

On 24 February 2021, HMRC wrote to Moir to inform it that, as a result of its failure to respond, HMRC was considering applying to the FTT for a penalty. No response was received.

Officer Bontempo took over conduct of HMRC’s investigations around this time. On 28 March 2022, HMRC wrote to Moir stating that an application would be made to the FTT for the imposition of penalties under 98C TMA 1970. In this letter Officer Bontempo set out HMRC’s reasons for considering these arrangements notifiable, and for considering Moir to be a promoter of these arrangements.

On 26 April 2023, Moir responded to HMRC, denying HMRC’s allegations and asking to see the documents on which HMRC relied. On 9 January 2023, HMRC responded, stating that an application would be made to the FTT and that Moir would have the opportunity to respond in the FTT proceedings initiated by HMRC.

HMRC filed their application for penalties on 12 January 2023. On 3 March 2023, the FTT directed Moir to file a Statement of Case no later than 2 May 2023.

On 5 May 2023, the FTT received a letter from Moir, enclosing a letter than had been sent to HMRC on 27 February 2023. In this letter, Moir summarised the documents that HMRC had included for the nine sample employees, and denied that the arrangements were notifiable. Moir also set out why it did not consider it was a promoter and why it did not consider that the arrangements were notifiable, before inviting HMRC to withdraw its application.

On 21 July 2025, the FTT received Moir’s Statement of Case. This was just six sentences long. On 27 October 2023, the FTT issued directions. Subsequently a two day hearing was listed in July 2024.

On 9 May 2024, HMRC applied for an Unless Order, requiring Moir to file an Amended Statement of Case or have the original Statement of Case struck out. This application came before Judge Fairpo who issued the Unless Order sought by HMRC. In the absence of a response from Moir, Judge Fairpo subsequently confirmed that Moir’s Statement of Case was struck out.

Despite objections from Moir about HMRC’s delay, on 10 June 2025, HMRC filed their written submissions and their authorities bundle.

Section 318 FA 2004 defines “arrangements” as including “any scheme, transaction or series of transactions”. It is apparently accepted by Moir that there was a series of transactions – and thus an arrangement – which took place in respect of each of their individual clients.

The arrangements under consideration here, described by HMRC as the “Jarvis International Annuity arrangement”, took the form set out below.

An individual agrees with an employment agency that he or she will be placed with an end-client to whom that individual will provide services. The nine sample individuals whose details are in HMRC’s bundle provided a range of different services, working via an employment agency, for a variety of organisations.

A common feature of these engagements is that the end-client required the individual to be engaged via an umbrella company. Individuals seeking to engage an umbrella company entered into transactions involving Moir and Jarvis. This seems to have occurred even when an individual was already director of a company that could have acted as an umbrella company.

Moir informed relevant individuals that they should tell their employment agency that Moir would be the relevant umbrella company. Moir emailed individual SH on 3 May 2018:

On 9 October 2019, Moir emailed individual CKC in response to an enquiry about whether Moir would work with a named employment agency:

Individual CKC stated (in response to HMRC’s enquiries) that Moir was the umbrella company she used for her engagements. The employment agency who placed Individual SH provided him with a project schedule which named Moir as the “Umbrella Company”.

However, in the arrangements under consideration here, the entity that engaged individuals seeking an umbrella company was not Moir but Jarvis, a company which had been incorporated in Mauritius in 2016. (Mr Bontempo has stated in his witness statement that Jarvis may have moved to the Seychelles in 2018. Although it may explain the absence of a response to HMRC’s 2020 correspondence, Jarvis’s precise location does not affect these proceedings before the FTT.)

Moir asked the individual to complete with Jarvis the relevant onboarding procedures (completion of an application form, signing a disclaimer, and provision of identity confirmation, et cetera). The documents in the bundle show that each of the nine individuals for whom there are details, entered into a contract of employment with Jarvis.

There were (at least) two different types of payment arrangement offered by Moir: a “standard PAYE” model and an “annuity” model. The annuity model was also described by Moir as “the Jarvis Solution”. I am satisfied that the “annuity model” and “the Jarvis Solution” are the same arrangements, and that they are the same as what HMRC describe as the “Jarvis International Annuity arrangement” that is the subject of these proceedings.

The fact that there are (at least) two options is demonstrated by an email from Moir to individual CKC sent on 18 September 2018. In this email Moir explained:

Individuals who had agreed to use the annuity model, received an offer letter from Jarvis with an employment contract and an assignment schedule.

Clause 8.2 of the employment contract specified that the individual would be paid “basic pay”. This is defined in the contract as the “appropriate salary as outlined in the Assignment Schedule”. In the email of 2 May 2018 to individual SH (set out above), the “basic pay” was the £15,000, also described as the “small portion of the fees received”.

To enable the individual to receive more than just the “basic pay” out of the fees paid by the end-client for their services, each individual also entered into a grant option agreement with Jarvis. This was executed as a deed.

The recitals to this deed set out that Jarvis wished to “make an arm’s length investment with a party with which it has a working relationship”, i.e. the individual, and that the individual would grant to Jarvis “the right to enter into an annuity in accordance with this Deed”. The recitals also set out that both Jarvis and the individual were keen to “ensure that no inadvertent liability to UK tax under ITEPA or ITTOIA arises as a result of the nature of their collateral working relationship”.

Under Clause 2(a) of the deed, Jarvis agreed to make payments (of an unspecified amount) to the individual “at its own discretion from time to time and that these shall be by way of consideration for having received the Grantor’s Grant”. The “Grantor’s Grant” is defined as being an undertaking by the individual to enter into the annuity agreement in the schedule to the deed. The terms of that annuity agreement were that the individual would pay to Jarvis yearly payments which were ten per cent of the aggregate of the payments that Jarvis had paid to the individual from the signing of the deed to the date that the annuity agreement was entered into. Thus, the agreement between the individual and Jarvis was that Jarvis would make unspecified payments to the individual and, once the annuity agreement had been entered into, the individual would, each year, pay Jarvis ten per cent of the total payments Jarvis had made. In theory therefore, if Jarvis had paid an individual £90,000 and the events which triggered entry into the annuity agreement occurred, that individual would be obliged to pay Jarvis £9,000 per year, every year, for life.

However, there were further terms that had to be met before an individual entered into the annuity agreement. In particular, clauses 2(c) and 2(d) of the deed.

Clause 2(c) provided that the individual would only enter into the annuity agreement “once [Jarvis] has paid to the [individual] the additional fee of £10,000 and which is expressed in writing as being made under this sub-paragraph (c) of this Agreement”. HMRC have stated in their written submissions that they are unaware of any fee of £10,000 ever having been paid by Jarvis to any individual. Clause 2(d) provided that the individual would only enter into the annuity agreement “on the first date (‘the Grant Date’) which falls (i) after a period (commencing on or after the date this Agreement is entered into) of 300 consecutive days during which no Grantee’s Payments were made by Jarvis; or (ii) if later, the date on which the condition in sub-paragraph (c) above is first met.”

Therefore, provided Jarvis did not pay £10,000 to the individual expressly under Clause 2(c) then, even if there was a period of 300 consecutive days on which Jarvis did not make a payment to the individual, the individual would not enter the annuity agreement. I am satisfied that the terms of the deed put relevant circumstances entirely within the control of Jarvis. Provided Jarvis did not pay £10,000 to an individual expressly under Clause 2(c), no individual would ever enter into an annuity agreement.

I have set out how I understand the arrangements worked but this is not how Moir described the arrangements to individuals seeking an umbrella arrangement. An example of how Moir described to individuals how the annuity model worked, is set out in an email from Moir to individual SH sent on 2 May 2018. In this email, Moir stated:

I do not consider Moir’s description of the arrangements, as giving Jarvis (or an end-client) “the option to pay pension contributions in advance”, to be an accurate summary of the agreements made between Jarvis and an individual.

Once an individual had entered into agreement with Jarvis, and at the request of Moir, the individual confirmed to his or her employment agency that Moir was the relevant entity which would invoice the employment agency (or end-client) on behalf of the individual.

The individual was then subcontracted, usually via an employment agency, to provide services for an end-client. Once an individual had entered into the agreements with Jarvis and begun their work engagement with the end-client, Moir invoiced the employment agency or end-client for the individual’s work. These invoices were based upon the time worked by the individual, and were paid at the rate agreed by the end-client for that individual’s services. This could be daily, hourly, or occasional, depending on the prevailing practice in that organisation.

At the end of each payment interval (each week or month or as otherwise agreed with the individual), Jarvis made two payments to the individual.

The first payment made from Jarvis to the individual was the basic salary which it had been agreed that individual would receive. Tax and national insurance contributions were deducted from this basic salary. Jarvis issued payslips to the individual and these payslips show the basic salary and the deductions made. By way of example, individual CKC provided HMRC with a payslip dated 23 August 2019 showing her weekly basic salary of £270.83 for this period. Deductions totalled £40.61, and so a net payment of £230.22 was due to CKC. CKC’s bank statement showed a payment of £230.22 was received from Jarvis on 23 August 2019.

In addition, on either the same day or the next working day, Jarvis paid a larger amount (from which was apparently deducted employers National Insurance Contributions but no tax) to the individual. This payment was apparently made pursuant to the Grant Option Agreement. In the case of CKC, her bank statements show Jarvis made a second payment of £417.25 to her on 23 August 2019.

While the second payment to CKC was larger, it was of a similar scale to the basic salary payment shown on CKC’s payslip. In some cases there was far greater disparity. On 30 October 2019, Jarvis paid individual CMN a basic salary (net of tax and NICs) of £218.92. In his response to HMRC enquiries, individual CMN told HMRC that on 30 October 2019, he had also received an additional payment from Jarvis of £21,730,91, and that this larger payment was not taxed.

In the examples shown in the bundle, the larger payment does not appear on the individual’s payslip but the second payment is apparent either from the bank statements in the bundle or is stated in the individual’s response to HMRC’s enquiries. Individual JE confirmed to HMRC in response to HMRC’s enquiries:

Individual JE provided HMRC with a copy of Moir’s email of 9 August 2019 to individual JE, which stated:

Moir told individuals that the second (larger) payment should not be considered to be income. In an email to individual CMN on 4 November 2019, Moir stated:

In each case, the larger payment made to the individual was made net of the deductions made by Jarvis for its fees. Individual JE provided HMRC with illustrations sent to him of the amounts he would receive if he were to provide his services via Jarvis. One of these illustrations, sent on 1 April 2019, was based upon a work placement entitling JE to a gross fee of £1,591 each week. The illustration showed a “weekly gross salary” of £291.67 and a weekly gross “PPTD” (also described as “the annuity portion”) of £1,299.33. A total of £39.28 (being tax, employees National Insurance Contributions and PI insurance) was shown as being deducted from the weekly gross salary. The illustration also showed deductions of £236.66 from the PPTD payment, being a management fee of £218.76 and employers National Insurance Contributions of £17.89.

The illustration specified that JE would take home 83% of the gross pay due under the work placement. In contrast, Moir’s estimate was that if individual JE used a traditional PAYE umbrella solution and had about £300 of expenses each week then he could expect to receive “close to 71% of your gross income”.

In the “annuity based payment solution” offered to individual JE, the management fee charged by Jarvis (of £218.76) amounted to approximately 13.75% of the gross salary that the end-client was prepared to pay for JE’s services. A subsequent illustration, sent to individual JE on 25 July 2019 for a different prospective placement, showed a weekly gross fee of £1,480. The weekly management fee had reduced to £203.50 but remained at 13.75% of the gross weekly fee to which JE was entitled. A third illustration, sent on 5 August 2019, shows a weekly gross fee of £1,295. The management fee which Jarvis would deduct is £178.06, which is approximately 13.75% of the gross weekly fee to which JE was entitled.

Moir provided similar illustrations of the annuity model to individuals CKC and SH, except that these both showed annual figures and there was a less detailed breakdown of the deductions. In an illustration dated 5 September 2019 for individual CKC, a gross annual salary of £40,724 was shown. A total deduction of £6,127.55 was shown for both insurance and Jarvis’s management fee. This is a deduction of approximately 15% of the total gross annual salary. Similarly, in an illustration dated 2 May 2018 for individual SH, a gross annual salary of £91,200 was shown. A total deduction of £13,068 was shown for both insurance and Jarvis’s management fee. This is a deduction of approximately 14.33% of the total gross annual salary.

While there are no similar illustrations for the traditional PAYE model offered by Moir in the bundle, there are three payslips for individual JE. These are all for the same week and so I find, on the balance of probabilities, that these are illustrations prepared for JE to show him how his weekly take-home salary (of £1,591 in all of these estimates) would differ with different levels of expenses. In each of these examples, the “margin” that Moir (as apparent employer) would charge as an umbrella company is £26 each week.

I am satisfied that the “annuity solution” under consideration here is not (to use Moir’s words) a “traditional PAYE model”. I am also satisfied that a smaller amount of tax and NICs was deducted from the total payments Jarvis made to an individual when that individual used the annuity solution, than would have been deducted had that individual used a traditional PAYE model.

Having set out the relevant arrangements, I can now consider the issues in dispute.

It is necessary to set out the relevant legislation in some detail to understand what is meant by “promoter” and by “notifiable arrangement”. The legislation requires the reader to work through a number of definitions, applying those to the relevant facts, before returning to consider whether there are “notifiable arrangements” as defined in Section 306 FA 2004, and whether Moir is a “promoter” as defined in Section 307 FA 2004.

The starting point is Section 307 FA 2004, which provides:

Thus there must be “notifiable arrangements” or a “notifiable proposal”, for a person to be a “promoter” in relation to them. The meaning of “notifiable arrangements” and “notifiable proposal” is set out in Section 306 which provides:

The Tax Avoidance Schemes (Prescribed Description of Arrangements) Regulations 2006/1543 were made under the power in Section 306(1) FA 2004, and came into force from 1 August 2006. Regulation 5 sets out the arrangements which are prescribed. It provides:

Therefore, if the arrangements under consideration here fall within any one of the descriptions specified, they will be “notifiable arrangements”. HMRC argue that the provisions of Regulations 8, 10 and 18 apply to the arrangements here.

Regulation 8 provides:

Regulation 8 is widely drafted so either a promotor or a person connected with a promoter would be able to obtain a premium fee. A premium fee is a fee that is attributable to, or contingent upon, an advantage in relation to any tax that might be expected as a main benefit of the arrangements.

I consider first whether an advantage in relation to tax might be expected as a main benefit from the arrangements. HMRC submit that this is the case, and point to Moir’s admission that there is an “incidental” tax advantage to the annuity model arrangements.

As HMRC note, Moir have accepted that some tax advantage was intended to be obtained from the annuity solution. Given emails such as Moir’s email of 2 May 2018 to Individual SH (set out above) it would be extremely difficult for Moir to deny that any advantage in relation to tax might be expected from the arrangements.

In their correspondence of 27 February 2023 to HMRC, Moir set out what they argue is the purpose of the arrangements:

I have considered Moir’s argument that the “real purpose of the arrangements” was to provide a cash-flow advantage for individuals. However, I have been unable to find any reference to such purpose in the correspondence between Moir and individuals in the bundle. If enhanced cash-flow was the main purpose of Moir’s annuity solution then it is peculiar that Moir did not mention this to individuals when explaining how their arrangements worked. In addition, having considered the bank statements showing the dates on which individuals were paid under the annuity solution, it is difficult to see what Moir thought was the cash-flow advantage gained by any of the individuals who used the annuity solution model. As Moir explained in its email of 2 May 2018 to Individual SH:

An arrangement which resulted in payment of a small amount on one day but with a delay of a further working day for payment of a larger amount, would not have resulted in a cash-flow advantage. Having to wait a further working day would not have assisted any individuals who were on the “breadline”. While those individuals would receive a larger amount overall (because Jarvis did not deduct the tax that would have been required to be deducted if the second payment had been accepted to be salary) the delay in receiving the majority of the sum due would disadvantage any individual worker who required “cashflow assistance”.

Having considered all of the documents in the bundle, and the many references by Moir to acting “in the most tax efficient way possible” and being able to use “tax relief” to maximise the percentage of the gross salary that was retained by an individual, I am satisfied that one of the main benefits (if not the main benefit) that might be expected to arise from the annuity arrangements set out above was the obtaining of a tax advantage.

I look now at whether there was a “premium fee”, that is a fee which was attributable to, or contingent upon, the tax advantage that I am satisfied was expected to be brought about by the annuity arrangements. In HMRC v Hyrax Resourcing Ltd & Ors [2019] UKFTT 63 (TC), Judge Mosedale stated:

HMRC argue in their submissions that Moir (or Jarvis) was able to take 12-14% of the amounts paid through the arrangements, and that this percentage is “economically equivalent to a fee”. I agree with HMRC that a percentage payment is equivalent to a fee payment, and that what is relevant is whether Moir or Jarvis is able to earn an amount economically the same as a premium fee which is attributable to the intended tax advantage or contingent upon the obtaining of that tax advantage.

In their correspondence of 27 February 2025 to HMRC, Moir state:

Although Moir appear shocked by HMRC’s suggestion that individual CMN paid a fee of 12%, the illustrations that Moir provided to individuals, detailed above, show that Jarvis proposed deducting a management fee of 13.75% to individual SE and a fee (for management and insurance combined) of approximately 14.33% for individual SH, and of approximately 15% for individual CKC.

Moir has referred to a fixed fee of £26 being insufficient to cover its overheads. This fee appears in the three Moir payslip illustrations provided to individual JE, apparently to illustrate the traditional PAYE model, and two payslips for individual CKC which Moir provided as enclosures to its letter to HMRC dated 27 February 2023. Towards the end of the bundle there are also payslips for KM, LB and EA-S, who were employees of Moir. Those payslips demonstrate Moir’s traditional PAYE model rather than the annuity model operated via Jarvis.

In respect of the annuity model, there are no payslips or illustrations which show a fixed fee (of £26 or otherwise). Jarvis was entitled to charge its fee for the annuity arrangements as a percentage of the gross fee for the individual’s services payable by the end-client. However, I am satisfied that a percentage fee which was as large as 13.75% of gross fee for services was possible under the annuity model only because such a small amount of tax had been deducted from the two payments made to the individuals. Realistically, no prospective individual user of Moir’s traditional umbrella model would have agreed that Moir should deduct 13.75% of their gross salary as payment for Moir’s services, in addition to the deduction of tax and NICs.

In Hyrax, Judge Mosedale also stated:

I reach a similar conclusion here: Moir and/or Jarvis split the expected tax saving with the individual user. I am satisfied that the percentage fee which Jarvis deducted was attributable to (or contingent upon) the tax advantage expected to be brought about by the annuity solution offered by Moir.

The final part of Regulation 8 to consider is whether Moir or Jarvis could expect to obtain a premium fee “from a person experienced in receiving services of the type being provided”. All of the individuals who used the annuity model did, in fact, pay the significantly higher percentage fee for use of that model, and so I am satisfied such a fee could be expected to be obtained from persons using Moir and/or Jarvis for the umbrella arrangements.

Therefore, I am satisfied that there was a premium fee, and that Regulation 8 applies to the arrangements under consideration here.

Having reached this conclusion, it is not strictly necessary to consider Regulation 10 or 18, and so I touch upon each of these only briefly.

Regulation 10 provides:

In making their submissions, HMRC have argued that the FTT should consider the four stage test set out in Hyrax which summarises Regulation 10:

HMRC’s submission is that the answer to each of these questions is yes. In its letter of 27 February 2023, Moir accepts that the arrangements used standard template contracts of employment, but it says that this was due to efficiency and to avoid discrimination. Having seen the documents in the bundle for nine sample individuals, I am satisfied that the documents used by both Jarvis and Moir were standardised, that the form of these documents was determined by Moir and/or Jarvis, that the documents did not need to be tailored to any material extent, and that the purpose of this standardisation was to enable Moir and Jarvis to implement the arrangements.

I have already concluded that a main purpose of the arrangements is to enable a person to obtain a tax advantage. I am satisfied that Regulation 10 applies to the arrangements under consideration here.

For the avoid of doubt, I have not ignored the fact that Regulation 10 is subject to Regulation 11. Although Moir has not argued that any of the exceptions in Regulation 11 apply, I have nevertheless considered Regulation 11, and I am satisfied that Regulation 11 does not apply to except the arrangements here from falling within Regulation 10.

Regulation 18 provides:

Condition 1 involves the taking of a step. Moir appears to accept that this condition is met, and I am satisfied that this condition was satisfied when Jarvis entered into transactions and made payments to relevant individuals.

Condition 2 is met if one of the main benefits is that an amount that would otherwise count as employment income under section 554Z2(1), is reduced or eliminated. While Moir has denied that a main benefit of the arrangements is the reduction of employment income, I do not agree. As Moir explained to individual JE on 1 April 2019:

I do not accept that individuals using the annuity model arrangements would agree to take a small “basic salary” unless they were satisfied that a large part of the remainder of the gross fees for their services would also be paid to them after that remainder of those fees had supposedly been converted into another form of payment. I am satisfied a main benefit of the arrangements is the reduction of employment income.

HMRC argue that Condition 3 is not met as none of the exclusions in Sections 554E to 554XA apply. This aspect is not addressed by Moir. I am satisfied that HMRC are correct in their submissions, that Chapter 2 of Part 7A does apply and so Condition 3 is not met.

That is sufficient for Regulation 18 to apply.

If the arrangements that are the subject of this application are within any of Regulation 8, 10 or 18, then they are “notifiable arrangements”. I am satisfied all three of Regulations 8, 10 and 18 apply to the arrangements here. Having satisfied myself that the arrangements that are the subject of this application are “notifiable arrangements”, I can now return to Section 307 to consider whether Moir was a “promoter”.

Moir has denied that it meets any of the conditions in Section 307(1)(a), and so denies that it is a promoter. Moir has not addressed Section 307(1)(b). I agree with HMRC that Section 307(1)(b)(ii) applies as, in the course of its business, Moir made the arrangements under consideration available for implementation and also organised and managed those arrangements.

For Section 307(1)(b)(ii) to apply, Moir’s business must be a “relevant business”, and so it must be a business which involves the provision “of services relating to taxation”. HMRC’s submissions in this regard are the Moir’s services relate to taxation because Moir gives advice about the tax advantages of entering into its arrangements. I agree. I am satisfied that a service providing arrangements that structure employment income payments in a particular way in the expectation of obtaining a tax advantage from that structure, is a service relating to taxation.

In addition, I have noted the declaration that individuals were required to sign on entering the annuity arrangements, which stated:

This declaration also required an individual who received an enquiry letter from HMRC to notify that enquiry to Jarvis within 48 hours, and to use Jarvis’s advisers to provide that’s individual’s “defence”. Although that declaration was part of the agreements signed with Jarvis, once HMRC had begun their investigations some of the individuals who had engaged with Jarvis then contacted Moir. Moir advised Individual CKC that it had “a competent team of compliance and tax specialists who determine the best course of action”. I am satisfied, from the remarkably similar wording that unrelated individuals used in their responses to HMRC’s enquiries, that Moir provided advice to those individuals on the response that should be given. Advice on how to respond to an enquiry by HMRC could not be anything other than a service relating to taxation.

After that lengthy consideration, I decide answer issue 1 in favour of HMRC. I am satisfied that Moir was a “promoter” of “notifiable arrangements” as defined by sections 306 and 307 FA 2004.

This issue arises only because I have found (above) in HMRC’s favour, that Moir was the promotor of notifiable arrangements. I consider the obligations under Section 308 and 313A separately.

The relevant parts of Section 308 provide:

The terms “prescribed period” and “prescribed information” are defined in Regulations 4 and 5 of the Tax Avoidance Schemes (Information) Regulations 2012. The relevant parts of Regulation 4 provide:

The relevant parts of Regulation 5 provide:

I am satisfied that Moir, as the promoter of notifiable arrangements, was obliged to comply with its obligations under Section 308(3). Therefore, within five days of first becoming aware of any transaction using the Jarvis annuity model, Moir was required to send HMRC sufficient information as might reasonably be expected to enable HMRC to comprehend the manner in which the Jarvis annuity model was intended to operate

In their correspondence with Moir HMRC have suggested that the Jarvis annuity model was in use from March 2018. Having considered the correspondence in the bundle, I am satisfied that Jarvis sent an offer letter to Individual CMN on 20 April 2018, and an (unsigned) employment contract is also dated 20 April 2018 (although the assignment period start date is said to be 8 January 2018). I am satisfied Moir was aware of this transaction as Jarvis required individual CMN to send to Moir the hard copy signed copy of the deed and annuity agreement.

I am also satisfied that Moir had not provided any information about the Jarvis annuity model to HMRC prior to HMRC’s opening letter of 11 December 2020 (or provided sufficient information to HMRC thereafter).

Therefore, Moir failed to comply with its obligations under Section 308 FA 2004.

With regard to Section 313A, the relevant parts of this section provide:

As found above, HMRC sent a formal notice under Section 313A FA 2004 to Moir on 18 January 2021. HMRC required a response by 17 February 2021. No response was received from, or on behalf of, Moir. Therefore, Moir failed to comply with its obligations under Section 313A FA 2004.

I decide issue 2 in favour of HMRC. I am satisfied Moir failed to comply with its obligations under both Sections 3018 and 313A 2004.

This issue arises only because I have found in HMRC’s favour on both issues above.

As set out above, Moir has denied that it was a promoter of notifiable arrangements. However, Moir has not specifically addressed whether it has a reasonable excuse for its failures to comply with its obligations under Section 308 and/or 313A FA 2004. The onus is on Moir in his regard. I agree with HMRC that the test to be applied in relation to any excuse put forward is that set out by the Upper Tribunal in Perrin v HMRC [2018] UKUT 156.

In their submissions HMRC have noted Moir’s letter to HMRC dated 26 April 2022, and suggested that this is the only reasonable excuse Moir has suggested. In that letter Moir states:

I have found (above) that Moir’s majority shareholder was Ms Deanna Moss until May 2019, and has been Ms Monica Varo since May 2019. However, there is no explanation of how this change of major shareholder is relevant to Moir’s failure to comply with its obligations under Section 308 and/or 313A. The deadline for Moir to comply with its obligations under Section 308 was five days after first becoming aware of any transactions forming part of the Jarvis annuity arrangements. I have found above that Moir was aware of Jarvis’ arrangements with individual RMN in April 2018. There is no explanation of how the prospective sale of Moir prevented Moir from complying with its Section 308 obligations. If there is an undisclosed reason for Moir’s non-compliance prior to May 2019, no reason has been advanced for why these obligations were not complied with once the sale of Moir’s shares had been concluded.

The deadline for Moir to comply with its obligations under Section 313A was 17 February 2021. The sale of Moir had concluded 21 months earlier. There is no explanation of how that long ago completed sale could be relevant to Moir’s Section 313A non-compliance.

I do not consider that Moir being put up for sale, or being sold, constitutes a reasonable excuse for a failure to comply with an obligation under Section 308 or 313A FA 2004.

I have not identified any other explanation put forward by Moir for why it has not complied with either its Section 308 or Section 313A obligations. In these circumstances I decide issue 3 in favour of HMRC. Moir has not demonstrated a reasonable excuse for its non-compliance with its obligations under either Section 308 or Section 313A FA 2004.

This final issue arises only because I have found in HMRC’s favour on all three issues above. I have not identified any submissions from Moir concerning the amount of a penalty (if any) that should be applied for non-compliance with either Section 308 or Section 313A.

Penalties are to be calculated in accordance with Section 98C TMA 1970. However, the legislation is not straightforward: Section 98C(1)(a)(i) specifies that a penalty must not exceed a specified maximum, before Subsection 98C (2ZB) provides:

Therefore, in considering the amount of the penalty, I am required to take account of all “relevant considerations” including the amount of the fees likely to have been received by Moir, and the “desirability of [the penalty] being set at a level” which deters Moir or other persons from engaging in similar failures in the future.

It is not possible to know precisely the amount of fees received by Moir in connection with the notifiable arrangements. In estimating this amount, HMRC have had regard to the turnover declared in Moir’s VAT returns for the periods 09/18 to 03/20 inclusive, which totals £13,547,551. On the basis that Moir invoiced organisations for the gross fee payable for each individual’s work, and a percentage of this gross fee was deducted by Jarvis before payment was made to individuals using the annuity model, HMRC have suggested that an amount equal to 12% of Moir’s turnover would be an acceptable estimate of the fees earned by Moir in connection with the Jarvis annuity model. I agree with HMRC that the turnover declared in Moir’s VAT returns for the periods 09/18 to 03/20 inclusive, amounts to £13,547,551. 12% of this figure is £1,625,706.12.

In the absence of more accurate information from Moir, I agree with HMRC that this is an acceptable way to estimate the likely fees earned by Moir. I have considered whether 13.75% of turnover would be a more accurate figure, increasing the estimate of fees earned to £1,862,788.26. However, I have also borne in mind that a small amount of the turnover declared by Moir would include amounts invoiced to end-clients but paid to individuals under the traditional PAYE model with tax, NICs and a £26 fixed fee deducted. In order not to over-estimate Moir’s income from only the notifiable arrangements, I agree with HMRC that 12% is the appropriate percentage.

For a penalty to deter others, it must be set at an appropriately high level. However, this does not necessarily mean the penalty should be set at the maximum possible (discussed below). I consider other relevant considerations include the period of time over which there was non-compliance (this is also be taken into account by the nature of the calculation of the maximum permissible), whether the non-compliance was remedied, any reasons for the non-compliance, the level of co-operation shown by Moir once HMRC began investigating and the extent to which HMRC can recover the tax which was not deducted.

All of these factors weigh against Moir. Moir did not respond to early HMRC correspondence, and Moir provided individuals with draft replies to send to HMRC which were inaccurate and obfuscatory. Moir does not have any reasonable excuse for its failures. It is unclear to what extent HMRC has or can recover the tax which was not deducted but, at best, there will be a significant additional cost to the Exchequer in recovering those amounts.

In setting the amount of the penalty, I need also to bear in mind that the penalty must not exceed the amount specified in Subsection 98C(1). The relevant parts of Subsections 98C(1) and (2) provide:

A failure to comply with Section 308 is one of the provisions included at Section 98C(2)(a), and so the maximum penalty is prescribed by Section 98C(1)(a)(i). Therefore, the penalty to be imposed on Moir for its Section 308 obligation should not exceed “£600 for each day during the initial period”.

Subsection 98C(2ZA) provides:

The “relevant day” is the day specified in the table in Section 98C. For a failure under Subsection 308(3) the “relevant day” is “the first day after the end of the period prescribed under that subsection”. As noted above, the “prescribed day” in relation to Subsection 308(3) is the “period of 5 days beginning on the day after that on which the promoter first becomes aware of any transaction forming part of arrangements to which that subsection applies”.

Therefore, the “initial period” begins on the sixth day after Moir first became aware of any relevant transaction, and that initial period ends on the earlier of: the date when the penalty is determined, and the last day before the failure ceases. In Moir’s case, the failure did not cease. Therefore, the initial period runs until the last date before the penalty is determined, i.e. the date of this decision. As I do not consider it appropriate that the penalty should be perceived as being increased through any delay by the FTT in the production of this decision, I will calculate the “initial period” as ending on the last date of the hearing of this appeal: 31 July 2025.

HMRC’s position in respect of Moir’s failure to comply with Subsection 308(3) is that Moir’s non-compliance commenced on 26 April 2018. I agree that is the relevant start date. Thus, the initial period runs from 26 April 2018 to 31 July 2025, which is 2,653 days. Therefore, the penalty to be imposed must not exceed £1,591,800 (being £600 for each of these 2,653 days).

Section 98C continues:

Bringing these considerations together, the estimate of the likely fees earned by Moir is £1,625,706.12. The maximum penalty which can be imposed is £1,591,800. Both those amounts already exceed £1 million.

While a penalty does not have to be imposed at the maximum level possible, I have concluded that in this case, the long period over which Moir’s failures continued, the absence of a reasonable excuse and Moir’s failure to co-operate once the Jarvis annuity model was identified by HMRC, all make it appropriate for the penalty to be set at the maximum so that others are deterred from behaving as Moir has done.

I have decided that, in respect of Moir’s failure to comply with its obligations under Section 308, the penalty to be imposed under Section 98C(1)(a)(i) is £1,591,800.

Finally, I turn to Moir’s failure to comply with Section 313A. Failure to comply with an obligation under Section 313A is noted at Section 98C(2)(e). As this is not a penalty caught by Section 98C(1)(a)(i), the relevant penalty should not exceed the amount specified in Section 98C(1)(a)(ii), which is £5,000.

I have decided that, in respect of Moir’s failure to comply with its obligations under 313A, the penalty to be imposed under Section 98C(1)(a)(ii) is £5,000. There are no mitigating factors for Moir’s failure in this regard and it is right that the penalty should be appropriately high to deter others.

I have decided as follows in respect of the four issues before the FTT:

I have decided that Moir was a “promoter” of “notifiable arrangements” as defined by sections 306 and 307 Finance Act 2004 (“FA 2004”).

I have decided that Moir did fail to comply with its obligations under sections 308 and 313A FA 2004.

I have decided that Moir does not have a reasonable excuse for its non-compliance.

I have decided that the total penalties to be imposed on Moir are £1,596,800.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.