Piers Consulting Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 September 2011 |
| Neutral Citation | [2011] UKFTT 613 (TC) |
| Date | 20 September 2011 |
| Court | First Tier Tribunal (Tax Chamber) |
[2011] UKFTT 613 (TC)
Charles Hellier (Tribunal Judge) (Chairman), Richard Corke
Gwydion Hughes, counsel, 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.Pier Consulting appeals against a decision made by HMRC to withdraw its gross payment status under the construction industry scheme.
2.The decision against which the Appellant appeals was dated 10 September 2010. The Appellant's Notice of Appeal was dated 8 October 2010 but received by the tribunal on 19 October 2010 and was therefore received outside the time limit for making an appeal. Mr Lewis indicated that the Respondents accepted that the Notice of Appeal had been posted on 8 October 2010. We decided to extend the time for making this appeal in these circumstances accordingly to admit the Notice of Appeal.
3.In outline, HMRC withdrew gross payment status because the company was late in paying its corporation tax for the period ended 31 December 2008.
4.At the hearing Mr Hughes argued that the Appellant had a reasonable excuse for the delay in its payment, that the failure to pay on time should therefore be ignored, and that as a result the Appellant should be treated as not having breached the compliance tests for CIS status.
5.Another issue arose. The statutory provision relating to the withdrawal of gross payment status indicates that HMRC "may" withdraw such status if the taxpayer breaches the compliance conditions, rather than that it "shall" do so. That appeared to confer a discretion on the HMRC. But Mr Lewis told us that HMRC did not exercise a discretion: if there was a compliance failure which was not reasonably excused then gross payment status was automatically withdrawn. That raised the questions as to whether and how a failure by HMRC to examine any discretion affected the jurisdiction of the tribunal in the appeal. At the hearing we undertook to consider these issues in our decision.
6.After the hearing we became aware that a differently constituted tribunal were considering the same issues in the case of Scofield TAX[2011] TC 01068. In that case there had been full argument on the issues. We decided to delay the release of our decision until the decision in that case had been published. When it was we sought the representations of the parties on it.
7.In this decision we address first the question as to whether the Appellant had a reasonable excuse for its failure to pay corporation tax on time, and then the issue of the jurisdiction of the tribunal in relation to the failure by HMRC to address any discretion which might be given to it under the legislation.
8.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 sub contractors must be made under deduction of tax unless the subcontractor is registered for gross payment. Finance Act 2004 section 63 subsec-or-para 1Section 63(1) provides that the Board must register a person for gross payment if it is satisfied that certain conditions have been met.
9.Among those conditions are those in Finance Act 2004 part 3 schedule 11Part 3 of Schedule 11 to the Act which include, in paragraph 12 of that Schedule, the requirement that the company has complied with all obligations imposed on it by the Taxes Act within the preceding twelve months. That strict requirement is mitigated by provisions in regulations, the Income Tax (Construction Industry Scheme) Regulations 2005 (the "CIS Regulations") which permit certain failures to be ignored, and by paragraph 12(3) of those Regulations which declares that a company is to be treated as having complied notwithstanding an actual failure, if:
(a) the company had a reasonable excuse for the failure to comply, and
(b) if the excuse ceased, it complied … without unreasonable delay after the excuse ceased.
10.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 for gross payment was to be made at that time the Board would refuse to register the company.
11.Among the provisions of the Taxes Act with which compliance is required is that in Taxes Management Act 1970 section 59Dsection 59D TMA which requires corporation tax for an accounting period to be paid on the day following the expiry of nine months from the end of the period.
12.Finance Act 2004 section 67Section 67 FA 2004 permits an appeal to the tribunal against the cancellation of registration, and in subsection (4) provides that the jurisdiction of the tribunal on such an appeal "shall include jurisdiction to review any relevant decision" of the Board under section 66.
13.We had before us a bundle of correspondence between HMRC and the Appellant and heard oral evidence from Stephen Turner, the Appellant's accountant from January 2001, who provided a witness statement, and from Phillipa George, the Managing Director of the Appellant who also provided a witness statement. We find the facts set out below.
14.The Appellant conducts the business of a recruitment agency specialising in the construction sector. It has eight full time members of staff and about 60 contract staff. The Appellant's customers are large companies which insist upon the Appellant having gross payment status. The removal of such status would result in its customers going elsewhere. Its business would be seriously adversely affected.
15.The company employs a book-keeper without formal accounting qualifications and engaged the independent help of a qualified accountant to oversee its accounting and compliance. It was clear that the Appellant took its statutory obligations very seriously and strove to ensure compliance with them. That was why it employed an external qualified accountant.
16.Until the beginning of December 2009 the company had engaged Rhianna Wilcox to perform this oversight role. She...
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