Carter Lauren Construction Limited v Her Majesty's Revenue & Customs, SPC 00603
| Jurisdiction | UK Non-devolved |
| Judge | Charles HELLIER |
| Judgment Date | 10 October 2006 |
| Respondent | Her Majesty's Revenue & Customs |
| Appellant | Carter Lauren Construction Limited |
| Reference | SPC 00603 |
| Court | First-tier Tribunal (Tax Chamber) |
SPC00603
Income Tax - Subcontractors Certificate - section 585 TA 88 - first appeal dismissed - taxpayer making second application and being refused- res judicata - whether issue estoppel can apply in a tax appeal under section 561(9) - whether issue estoppel prevents taxpayer asserting defaults were not minor and technical - whether second appeal should be stayed as an abuse of process - whether section 46 TMA prevents the second appeal being brought.
CARTER LAUREN CONSTRUCTION LIMITED Appellant
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Special Commissioner: Charles Hellier
Sitting in public in London on 24 August 2006
Matt Boddington of Accountax Consulting Ltd for the Appellant
Colin Williams, Inspector of Taxes for the Respondents
© CROWN COPYRIGHT 2006
DECISION
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On 30 September 2005 the Appellant applied to HMRC for a “CIS5” certificate under section 561 TA 88. On 10 November 2005 HMRC refused the certificate. The Appellant appealed.
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The appeal was heard by the General Commissioners on 2 February 2006. They refused the appeal. The Appellant made no appeal against that decision.
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The Appellant made a fresh application for a certificate on 24 March 2006. That was refused by HMRC on 6 April 2006. On 5 May 2006 the Appellant appealed against that decision electing for the appeal to be heard before the Special Commissioners.
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This preliminary hearing relates to the question of whether issues determined by the General Commissioners can be raised again by the Appellant in this second appeal. The Respondents assert that the Appellant is estopped from raising certain issues on the grounds that either (i) the doctrine of issue estoppel applies, or (ii) it would be an abuse of process to re-litigate those issues; or (iii) the matters determined by the General Commissioners are by virtue of section 46 TMA 1970 conclusively so determined and not open to re-examination in the second appeal.
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These contentions require an examination of the requirements of the sub-contractors’ legislation, an appreciation of the decision made by the general commissioners, an investigation of the applicability of the doctrines and statutes relied upon by the Respondents, and an examination of the applicability of those doctrines to the nature of the issues at large before each appeal tribunal. This decision is structured accordingly.
1. The Subcontractors’ Legislation
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Chapter IV Part XIII TA 88 provides that when a contractor in the construction industry pays a subcontractor he must deduct tax from the payment. It provides for an exemption when the subcontractor holds a certificate issued by HMRC under section 561.
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Possession of such a certificate by a subcontractor is highly valuable. Without it the contractor will suffer significant cash flow disadvantages because, although the tax deducted may be recovered by him, it may take some time to be reclaimed.
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The legislation provides conditions which must be satisfied before the certificate is issued. In the case of a company they are set out in section 565. There is a right of appeal against refusal to issue or renew a certificate given by section 561(9). The appeal may be to the General or to the Special Commissioners.
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Included among the conditions in section 565 are the following:
“(3) The company must, subject to subsection (4) below, have complied with all obligations imposed on it by or under the Tax Acts or the Management Act in respect of periods ending within the qualifying period and with all requests to supply to an inspector accounts of, or other information about, the business of the company in respect of periods so ending.”
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The qualifying period is a period of 3 years ending with the date of application for the certificate. Thus the qualifying period in relation to the first appeal commenced on 1 October 2002, but that for the second appeal on 25 March 2003.
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Section 565 continues:
“(4) A company which has failed to comply with such an obligation or request as is referred to in subsection (3) above, shall nevertheless be treated as satisfying this condition as regards that obligation or request if the Board are of the opinion that the failure is minor and technical and does not give reason to doubt that the conditions mentioned in subsection (8) below will be satisfied….
“(8) There must be reason to expect that the company will, in respect of periods ending after the end of the qualifying period, comply with all such obligations as are referred to in subsections (2) to (7) above and with such requests as are referred to in subsection (3) above.
“(8A) Subject to subsection (4) above, a company shall not be taken for the purposes of this section to have complied with any such obligation or request as is referred to in subsections (3) to (7) above if there has been a contravention of a requirement as to the time at which, or the period within which, the obligation or request was to be complied with.”
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That there have been 6 High Court appeals in relation to these matters over the last 2 years may show the importance of such a certification to a company (see Barnes v Hilton Main Construction 2005, STC 1532, Templeton v Transform Shop Office 2006 DTC 900, Arnold v G-Con Ltd 2006 STC 693, and on appeal 2006 STC 1516, John Cormack v CBL Cable Contractors 2005 EWHC 1294 (Ch), Hudson v JDC Services Ltd 2004 STC 834, and Revenue & Customs Commissioners v Facilities Maintenance Engineering Ltd 2006 EWHC 689 (Ch)).
The nature of the appeal Commissioner’s jurisdiction
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Section 561(9) provides for an appeal against the refusal of a certificate. It provides that “the jurisdiction of the Commissioners on such an appeal shall include jurisdiction to review any relevant decision taken by the Board, …”.
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Depending upon whether the appeal Commissioner’s jurisdiction is to conduct a full appeal or to review the Board’s decision on Wednesbury principles, the issues relevant to issue estoppel and abuse of process may be different. In Hudson (HMIT) v JDC Services Ltd 2005 EWHC 602 (Ch), however, Lightman J held that section 561(9) conferred a jurisdiction on the tribunal to determine afresh the decision of the Board and that the tribunal were free to substitute its own judgement for that of the Board. This affects the way in which any issue estoppel could apply.
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On the basis of Hudson the determination of each of the following issues will therefore be necessary for the making of a decision on appeal as to whether a certificate should be issued:
(i) whether there were defaults;
(ii) if so, whether those defaults (or, possibly, one or more of them) were minor and technical;
(iii) again, if there were defaults, whether those defaults gave cause for concern over future compliance; and
(iv) in any case, whether there was reason to expect that the company would be compliant in future.
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Two issues arise in relation to the minor and technical defence in section 565(4) which are relevant to the question of issue estoppel because they relate to the nature of the decision by the General Commissioners. The first relates to the facts and evidence that are relevant to the question of whether a default is minor and technical - and thus to whether or not the second tribunal will have regard to the same facts as the first in relation to any part of its decision.
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The second issue relates to whether the minor and technical defence is to be applied to each separate act of non-compliance or to the acts of non-compliance as a whole. That issue is of relevance because it relates to the question of exactly what issue was, or had to be, determined by the first tribunal.
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I have already noted the difference between the two limbs of section 565(4): the first requiring a finding of whether acts of non compliance were minor and technical, and the second separately requiring a decision as to whether those acts gave cause for concern as to future compliance That distinction, and the decision of Lightman J in Hudson in relation to it was referred to by Laddie J in John Cormack (see paragraphs 15 and 16 of his judgment). Having done so Laddie J then turned to the meaning of “minor and technical”. He said rejecting an...
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