Access Contracting Services Ltd v The Commissioners for HMRC
[2023] UKFTT 973 (TC)
Evancast (Kent) Limited v The Commissioners for HMRC
21 November 2024
[2024] UKFTT 1045 (TC)
First-tier Tribunal
A construction company didn't properly check if their payroll agency was paying the correct construction taxes. Even though they used accountants, the court said they should have done more to make sure the taxes were paid, so they had to pay the missing money.
Key Facts
- •Evancast (Kent) Limited (EL) appealed HMRC's refusal to grant relief under Regulation 9(5) of the Income Tax (Construction Industry Scheme) Regulations 2005 for under-deduction of CIS payments in 2018-2019 and 2019-2020.
- •EL engaged Langdale & Goodfellow (LG) to manage payroll for approximately 95% of its self-employed subcontractors.
- •EL paid LG at least £3 million in 2018-2019, but did not verify whether LG made CIS payments to HMRC.
- •HMRC argued EL did not take reasonable care to comply with CIS legislation, while EL argued they relied on professional advisors and believed LG provided only an administrative service.
- •The disputed amount totalled £927,586.59.
Legal Principles
Reasonable care under Regulation 9(3)(a) of the CIS Regulations requires a standard of a prudent and reasonable taxpayer in the circumstances.
HMRC v David Collis [2011] TC 01431
Reliance on others does not automatically constitute reasonable care; the taxpayer must actively seek and obtain relevant advice.
Maypine Construction Ltd [TC05558]
The burden of proof lies on the taxpayer to demonstrate compliance with Regulation 9(3)(a).
Regulation 9(3)(a) of the CIS Regulations
A taxpayer's belief that legislation does not apply is not a defence unless objectively reasonable in the circumstances.
Nicholson v Morris
Subcontractors include labour agencies supplying workers for construction operations.
HMRC guidance CIS340, paragraph 2.1
Outcomes
Appeal dismissed.
EL failed to demonstrate reasonable care in complying with CIS legislation. They did not conduct sufficient due diligence on LG, failed to verify LG's CIS payments to HMRC, and relied on assumptions rather than actively seeking advice despite their knowledge and experience in the industry and despite the significant sums involved.
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