J P Whitter (Waterwell Engineers) Ltd v Revenue & Customs

INCOME TAX � construction industry scheme � cancellation of gross payment status � s66 Finance Act 2004 � HMRC discretion � whether properly exercised - �Failure to take into account effect of cancellation on appellant � Barnes v Hilton Main Construction considered and distinguished � appeal allowed

The appellant challenges a decision of HMRC to cancel its registration for gross payments for the purposes of the construction industry scheme. The appeal was originally heard on 11 April 2012 and a decision dismissing the appeal was released on 20 April 2012. Following that hearing the appellant appointed a new representative and made an application to set aside the decision.� That application was granted and the appeal was re-listed to be heard on 9 August 2012. The hearing before us was a fresh hearing and we have had no regard to the findings and reasons given in the original decision.

We heard evidence from Ms Sally Whitter on behalf of the appellant. We also had documentary evidence before us in the form of correspondence between the appellant�s representative and various officers of HMRC. We make our findings of fact based on this evidence, although it is fair to say that there was little dispute as to the underlying facts. The real issue between the parties is the inferences we can draw from those facts and the extent to which they are relevant in considering the decision to cancel the registration.

The decision under appeal is a decision dated 3 August 2011 cancelling the appellant�s registration for gross payments. It was confirmed by HMRC following a statutory review dated 12 December 2011. Before dealing with the facts surrounding the decision, we set out the relevant statutory provisions in relation to the construction industry scheme.

The law regarding the construction industry scheme is contained in sections 57-77 Finance Act 2004 , Schedules 11 and 12 of that Act and the Income Tax (Construction Industry Scheme) Regulations 2005 . Section 64 of the FA 2004 sets out the requirements for registration for gross payment. In particular section 64(4) provides that where a company is applying for registration it must comply with the three statutory tests set out in Part 3 of Schedule 11 . These are generally described as the business test, the turnover test and the compliance test. Paragraph 12 deals with the compliance test: