Cardiff Lift Company
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 September 2011 |
| Neutral Citation | [2011] UKFTT 628 (TC) |
| Date | 23 September 2011 |
| Court | First Tier Tribunal (Tax Chamber) |
[2011] UKFTT 628 (TC)
Charles Hellier (Tribunal Judge) (Chairman), Richard Corke
David Patterson, partner in the Appellant firm, and Hugh Morgan for the Appellant
Dave Lewis for the Respondents
Construction industry scheme - compliance failures - held no reasonable excuse - did HMRC have a discretion under Finance Act 1994 section 66s. 66 FA 1994 - Scofield [2011] TC 01068 applied - HMRC's decision void - appeal allowed
1.The Cardiff Lift Company, a partnership between Ms H Davies, Mrs G Patterson and Mr Patterson, appeals against HMRC's decision to cancel its gross payment status under the Construction Industry Scheme (CIS).
2.HMRC say that they may cancel gross payment registration if the partnership or the partners do not comply with their obligation under the Taxes Acts. They point to failures of each of the parties and of the partnership to do so within the twelve month preceding their decision to cancel.
3.As will be seen the legislation provides that if a person has a reasonable excuse for a failure it is to be disregarded. The first question we addressed was therefore whether there were reasonable excuses for these failures.
4.A question arises as to whether HMRC have a discretion to cancel regulations or whether they are required do so if the taxpayer does not comply with his obligations. This issue was fully argued before a differently constructed tribunal in the case of Scofield TAX[2011] TC 01068. The tribunal delayed its decision in this case to await the decision of the tribunal in that case, and after its publication sought representations from the parties in connection with the issues it raised. In the second part of this decision we consider the question of HMRC's discretion to cancel registration.
5.Finance Act 2004 part 3 chapter 3Chapter 3, Part 3 Finance Act 2004 contains the provisions for the Construction Industry scheme. Under the scheme certain payments to subcontractors must be made under deduction of tax unless the subcontractor is registered for gross payment. Section 63(1) provides that the Board must register a person for gross payment if it is satisfied that certain conditions are met.
6.Among those conditions are those in Finance Act 2004 part 2 schedule 11Part 2 of Schedule 11 to that Act which includes the requirement that each of the partners in the partnership have "complied, so far as any charge to income tax or corporation tax is concerned as falls to be computed by reference to the profits or gains of the firm's business, with all obligations … under the Tax Acts or the Taxes Management Act 1970" within the preceding 12 months. A further condition is imposed in the case of a partnership by Finance Act 2004 section 64 subsec-or-para 3 part 1 schedule 11section 64(3) and Part 1 of the Schedule that the individual partners must comply with their obligations under those Acts.
7.These strict requirements are mitigated somewhat by provision in the Income Tax (Construction Industry Scheme) Regulations 2005 (the "CIS Regulation") which permit some failures to be ignored, and by paras. 2(4) and 8(3) which require the disregard of a failure if the person who failed had a reasonable excuse for the failure.
8.Finance Act 2004 section 66Section 66 provides that the Board "may at any time make a determination cancelling a person's registration if it appears to them that" if an application to register had been made at that time the Board would refuse to register that person.
9.Finance Act 2004 section 67Section 67 FA 2004 permits an appeal to this tribunal against the cancellation of regulation, and in subsection (4), provides that the jurisdiction of the tribunal on such an appeal shall include jurisdiction to review any relevant discussion of the Board under section 66.
10.The Taxes Act imposes requirements for individuals to make payments of and on account of their own tax liabilities and for employers to account for PAYE and NI on amounts paid to employees by certain dates.
12.We had a bundle of copy correspondence between HMRC and the Appellant before us and heard oral evidence from Mr Patterson and Mr Morgan. Mr Lewis also gave his account of the practice of HMRC. We find the following facts.
13.The firm conducts the business of the manufacture, installation and maintenance of lifts. It started business in 1986 manufacturing and installing lifts on a small scale, but in about 2008 moved into larger projects. The firm found that cash flowed from the larger projects more slowly since the majority of the payment for the work done was made after the (longer) job was finished.
14.Some of the firm's counterparties deduct tax from payments to it in error. In the year to August 2009 some £17,700 had been erroneously deducted.
15.The firm's customers also made retentions at the end of contracts. The total amount due and retained at any time has risen from about £100,000 in 2006 to £130,000 in 2009. Customers also pay late. Thus in April 2010 some £100K was due and awaited from customers.
16.These issues have meant that the partnership found cash flow difficult, but it had had these problems for many years although they became worse in the period after 2008.
17.The firm had, at the beginning of 2009, an overdraft facility of £425,000 which in April 2009 was increased to £500,000. The facility is secured against Mr Patterson's home and cash deposits by the other partners.
18.The firm is an employer and liable to account each month for PAYE and NI in respect of payments made to its employees. These payments are due, when electronic...
To continue reading
Request your trial
-
John Kerr Roofing Contractors
...has been considered by the First-tier Tribunal on a number of occasions. In Piers Consulting LtdTAX[2011] TC 01456 and Cardiff Lift CoTAX[2011] TC 01470 the Tribunal held that it did not have jurisdiction to substitute its own decision for that of HMRC. Effectively the Tribunal has a superv......
-
J P Whitter (Waterwell Engineers) Ltd
...has been considered by the First-tier Tribunal on a number of occasions. In Piers Consulting LtdTAX[2011] TC 01456 and Cardiff Lift CoTAX[2011] TC 01470 the Tribunal held that it did not have jurisdiction to substitute its own decision for that of HMRC. Effectively the Tribunal has a superv......
-
Revenue and Customs Commissioners v J P Whitter (Water Well Engineers) Ltd
...substitute its own decision for that of HMRC following the decisions of Piers Consulting Ltd TAX[2011] TC 01456 and Cardiff Lift Co TAX[2011] TC 01470 and that a decision by HMRC to cancel a person's registration for gross payment which has not been properly made should simply be quashed. H......
-
J P Whitter (Waterwell Engineers) Ltd
...as a result the decision was void. In support of this contention, Mr Buchsbaum referred the Tribunal to the case of Cardiff Lift CoTAX[2011] TC 01470 in which it was stated: It seems to us that there was no proper exercise of the power given to the Board by Finance Act 2004 section 66sectio......