CIS – status withdrawn as no reasonable excuse for late payment
The First Tier Tribunal recently heard an appeal by a taxpayer who operated a small glass and glazing business. He was appealing against the withdrawal of Gross Payments Status under the Construction Industry Scheme (CIS).
One of the key conditions that must be satisfied for Gross Payment Status to be granted and retained is that the sub-contractor pays all of their taxes on time. The taxpayer had done so at least until 2008. The Tribunal rejected the taxpayer’s argument that he had a reasonable excuse for late payments in respect of subsequent self assessment liabilities.
HMRC contended that the taxpayer had justifiably been denied Gross Payments Status as a number of tax payments had been made late. The taxpayer contended that he had not been contacted by HMRC about this change and that his contractors had been laughing at him and telling him that he must have been “naughty” with his tax. He also offered various excuses for the late payments and claimed not to have received a key document from HMRC.
HMRC conceded that the notice of withdrawal of gross payment status needed to have been received by the Appellant in order to be effective, however the Tribunal Judge said that on the balance of probabilities the taxpayer should have received the relevant notification. The Judge also found that the taxpayer did not have a ‘reasonable excuse’ for the late payments and admitted in the Tribunal that he was not sure of the reason for the late payments.
It is important to note that the Tribunal considers each case on its merits. There have been other recent cases where the Tribunal has accepted that the taxpayers had a ‘reasonable excuse’ for late payment. In such cases however the taxpayer is generally able to back-up the argument that he had a ‘reasonable excuse’ with concrete facts and evidence. That did not happen in this case.