Beech Developments (Manchester) Limited & Ors., R (on the application of) v Commissioners for HMRC
[2023] EWHC 977 (Admin)
Beech Developments (Manchester) Limited & Ors v The Commissioners for HMRC
9 May 2024
[2024] EWCA Civ 486
Court of Appeal
A construction company didn't deduct enough tax from payments to a subcontractor, leading to a large tax bill. The court decided the tax authority (HMRC) could still reduce the bill, even though the initial tax bill was already issued, if the company meets certain conditions. This means the tax authority cannot just keep extra tax money if the subcontractor already paid their taxes.
Key Facts
- •Appeal against Fordham J's dismissal of a judicial review claim by six entities ("Beech") concerning interpretation of Construction Industry Scheme (CIS) regulations.
- •Beech failed to make sufficient deductions from payments to a sub-contractor (BCPL), resulting in HMRC determinations totaling over £5.4m.
- •Beech argued that HMRC could issue a direction under reg. 9 of the CIS regulations to relieve them of liability even after a determination under reg. 13 was made.
- •HMRC's initial position was that a reg. 9 direction could not be issued after a reg. 13 determination.
- •The dispute centered on the interpretation of reg. 13(3) of the CIS regulations.
Legal Principles
Interpretation of statutes and regulations; emphasis on ordinary meaning and context.
Sections 61, 62, 71 of the Finance Act 2004 and Regulations 7, 9, 13, 56 of the Income Tax (Construction Industry Scheme) Regulations 2005.
Principles of access to justice; prevention of usurpation of tribunal function.
R (UNISON) v Lord Chancellor [2017] UKSC 51, Attorney General v Times Newspapers Ltd [1974] AC 273.
Taxation by law, not concession; limits on HMRC's power to grant concessions.
Vestey v Inland Revenue Comrs [1979] Ch 177, R v Inland Revenue Comrs, ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545, R (Davies) v HMRC [2011] 1 WLR 2625, R (Wilkinson) v Inland Revenue Comrs [2005] UKHL 30.
Interpretation of s.30A(4) TMA 1970 regarding the alteration of tax assessments.
Baylis v Gregory [1989] 1 AC 398, Sections 30A, 34, 31, 31A, 49A-49H, 50, 54 of the Taxes Management Act 1970.
Outcomes
Appeal allowed.
The Court preferred Beech's interpretation of reg. 13(3), holding that HMRC retains the power to issue a direction under reg. 9 even after a determination under reg. 13 has been made. HMRC's interpretation would create an extraordinary result, contravening general principles of access to justice and potentially resulting in an unjust windfall for HMRC.
HMRC's decision not to consider Beech's claim under reg. 9(4) quashed.
The court found that the previous FTT decisions, including North Point, were wrongly decided in holding that HMRC lacked the power to issue a reg. 9 direction after a reg. 13 determination.
HMRC required to reconsider Beech's claim in accordance with the court's decision.
The court clarified the interaction between regulations 9 and 13, emphasizing the importance of ensuring fair access to justice and preventing unjust enrichment for HMRC.
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