HMRC not required to consider financial effect of cancelling CIS gross payment registration

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The appellant company’s registration for gross payment under the construction industry scheme was (as with other registered taxpayers) subject to ongoing review by HMRC to ensure compliance with the conditions for gross payment registration. HMRC conducted an annual compliance review in May 2011, which the appellant failed due to late payment of PAYE. As this was the appellant’s third failed review, HMRC cancelled its registration for gross payment (under FA 2004, s 66(1)).

The appellant appealed against the cancellation (under FA 2004, s 67), but HMRC refused the appeal. The appellant successfully appealed to the First-tier Tribunal (FTT) ([2012] UKFTT 639 (TC)), but that decision was not upheld by the Upper Tribunal ([2015] UKUT 392 (TCC)) or the Court of Appeal (CA) ([2016] EWCA Civ 1160). The appellant appealed.

The appellant contended that in revoking its gross payment registration, HMRC took no account of the likely effect of their action on the company’s business, and that this represented a failure to take account of a material consideration, in breach of both domestic public law and of Article 1 of the First Protocol to the European Convention on Human Rights (‘A1P1’).

The Supreme Court (SC) concluded that the CA reached the right conclusion, substantially for the reasons they gave; the discretion in section 66 could not be read as extending to matters ‘which do not relate, directly or indirectly, to the requirements for registration for gross payment, and to the objective of securing compliance with those requirements.’

On the A1P1 issue, the SC also agreed with the CA that the exercise of the power within the scope of the statutory framework came well within the wide margin of appreciation allowed to the state for the enforcement of tax. The appellant’s appeal was dismissed.

JP Whitter (Water Well Engineers) Ltd v Revenue and Customs [2018] UKSC 31

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