This was an appeal in relation to the Income and Corporation Taxes Act 1998 (ICTA) against the Commissioners’ decision to issue a statutory Construction Industry Scheme (CIS) certificate to Transform Shop Office and Bar Fitters Ltd after the Inspector of Taxes refused to issue the CIS. The CIS provides that a contractor must make a deduction from payments made by it to a subcontractor in respect of the labour content of the subcontract. However, this is not necessary if the contractor holds an appropriate CIS certificate.

The Inspector of Taxes refused to issue a CIS to Transform as it took the view that failures by Transform to comply with its obligations in respect of PAYE during the qualifying period were not “minor and technical” and gave reason to doubt future compliance with the ICTA.

Transform had not paid its PAYE liabilities on time in any of the 34 months within the qualifying period that were recorded on the schedule of PAYE payments. Of those 34 late payments, Transform was more than 14 days late in paying on 10 occasions. No pressure or action had been taken by Inland Revenue to obtain payment of the PAYE tax on time during the qualifying period and the Commissioners found that an informal arrangement regarding these payments was accepted by the Inland Revenue. Transform had given evidence that they had never been contacted by Inland Revenue regarding their payment pattern. If there had been any contact or warning from Inland Revenue that they were jeopardising the renewal of the certificate then action would have been taken to comply fully with the Inland Revenue’s requirements.

Was the failure of Transform to comply with its obligations “minor and technical” and would not give reason to doubt that they would comply with the Inland Revenue’s requirements?

Reference

The expression “minor and technical” used in the ICTA was not a technical expression and must be construed purposively. The purpose which Parliament plainly had in mind was to procure strict compliance with tax obligations by making such compliance the price of obtaining a certificate. Parliament also recognised that failures to achieve such strict compliance might be, in the context of the grant of such certificates, venial. Whether, in a particular case the failure is to be regarded as minor and technical was ultimately left to the Commissioners to be found as a matter of fact and degree. In this case, the judge was not persuaded that the Commissioner’s decision to grant the CIS was a breach of their statutory duty or unreasonable.

*Full case details
Templeton (HM Inspector of Taxes) vs Transform Shop Office and Bar Fitters Ltd
High Court of Justice, Chancery Division (Revenue List), Justice Hart [2005] EWHC 1558 (Ch)

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Postscript

The question to consider on this appeal was whether the inspector’s decision was a legally possible one. In this case, although the Commissioners’ decision could be criticised in the way they expressed their final conclusions, as they had addressed the ICTA and expressed a conclusion with regard to the regularity of the late payments and the Revenue’s acquiescence over the whole period of the lateness, the non-compliance could be regarded as minor and technical. As these were not impossible conclusions for a reasonable body of Commissioners to have reached, the appeal was dismissed.