First-tier Tribunal (Tax)

[2009] UKFTT 269 (TC)

TC00215

  Appeal number TC/2009/11039

Construction Industry Scheme – Appeal against cancellation of registration for gross payment – No reasons given in notice of appeal – Whether notice valid – no

FIRST-TIER TRIBUNAL

TAX

                                      WESTVIEW RAIL LIMITED                     Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                    REVENUE AND CUSTOMS (corporation tax) Respondents

                                                TRIBUNAL: John Brooks (Judge)

                                                                        H Gareth Jones MBE JP ACIB

Sitting in public in London on 18 August 2009

The Appellant did not appear and was not represented

Nicola Parslow of HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.     As no representative for the Appellant company was in attendance when this appeal was due to start, the Tribunal asked the clerk to telephone Chase Bureau, the Appellant’s accountants, who confirmed that although the Appellant was aware of the date and time of its appeal it was not intended for anyone to attend on its behalf or for it to be represented at the hearing.

2.     The Tribunal was satisfied that reasonable steps had been taken to notify the Appellant of the hearing and that it was in the interests of justice to proceed with the hearing.

3.     This is an appeal by Westview Rail Limited (the “Company”) against the cancellation of its registration for gross payment status within the Construction Industry Scheme (“CIS”) by HM Revenue and Customs (“HMRC”).

4.     A company’s registration for gross payment may be cancelled by HMRC at any time under section 66(1)(a) of the Finance Act 2004 (the “Act”) if it appears that “if an application to register the person for gross payment status were to be made at that time” it would be refused.

5.     Section 63(2) of the Act provides that HMRC “must” register a company if satisfied that the requirements of section 64 of the Act are met. To meet these requirements, insofar as they are relevant to the present appeal, a company must satisfy the conditions set out in Part 3 of schedule 11 to the Act (see section 64(4)(a) of the Act).

6.     These conditions are the “business test”; the “turnover test”; and the “compliance test” set out in paragraphs 10, 11 and 12 of schedule 11 to the Act respectively.

7.     A company which appears to have failed the compliance test (which requires a company to comply with its obligations under the tax legislation) will be treated as having satisfied the test, in accordance with paragraphs 12(3) & (7) of schedule 11, if can establish that it has a reasonable excuse for the failure to comply with its tax obligations, has complied with its obligations without unreasonable delay after the excuse ceased and can be expected to comply in respect of periods after the qualifying period which, in the present case, is the 12 months to 17 October 2008, the date of the review by HMRC of the Company’s gross payment status (see paragraph 14 of schedule 11).

8.     A company aggrieved the cancellation of its registration for gross payment may “by notice appeal” under section 67(1) of the Act (as amended by the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009).

9.     Any notice of appeal must be made within 30 days of the cancellation under section 67(2) of the Act. Section 67(3)(b) of the Act provides that the “notice [of an appeal] must state the [company’s] reasons for believing [its] registration for gross payment should not have been cancelled.”

10.  In this case HMRC accept that the Company has satisfied the business test and the turnover test but that, in the absence of any reasonable excuse, it has not satisfied the compliance test in that for the 12 months to 17 October 2008 the monthly payments due under the Company’s PAYE scheme were made between one and 300 days late and that a payment of corporation tax due on 1 January 2008 remains outstanding as does a corporation tax return due on 31 March 2008.

11.  Accordingly HMRC notified the Company on 29 October 2008 of the cancellation of its registration for gross payment status. On 11 November 2008 Chase Bureau, the Company’s accountants, wrote to HMRC in the following terms:

With regards to our above named client [the Company] we would be grateful if you would accept this appeal against our client’s gross status being removed.

12.  Although this letter was sent within 30 days of notification of the cancellation of the Company’s gross payment status it does not provide any reasons for believing that the registration for gross payments should not have been cancelled as required by section 67(3) of the Act which therefore raises the issue of the validity of the notice and whether this is a valid appeal.

13.  Section 67(3) of the Act, which provides that the “notice must state the person’s reasons for believing …” is drafted in similar terms to section 31A(5) of the Taxes Management Act 1970 (“TMA”) which provides that a “notice of appeal must specify the grounds of appeal.”

14.  The requirement to specify the grounds of appeal in section 31A(5) TMA was held to be mandatory by the Special Commissioner (Dr John Avery Jones CBE) in Jacques v Revenue and Customs Commissioners [2006] STC (SCD) who, before finding the notice of appeal in that case to be invalid, said (at paragraph 13) “I am bound to construe the words of the statute which is that the Notice of Appeal must specify the grounds of appeal.”

15.  Given the similarity between section 67(3) of the Act and section 31A(5) TMA the Tribunal finds the requirement in section 67(3) of the Act, that the appeal notice “must” state reasons for believing that the registration for gross payment status should not be cancelled, to be mandatory. 

16.   As no reasons for believing that the Company’s registration for gross payment status should not be cancelled were included in the letter of 11 November 2008 from Chase Bureau to HMRC and no reasons have subsequently been provided either by or on behalf of the Company, despite written requests by HMRC for an explanation or an indication of a reasonable excuse or grounds of appeal, the Tribunal finds the notice of appeal to be invalid.

17.  The effect of the Tribunal finding the notice of appeal to be invalid is that there is no appeal before it and consequently the Company’s registration for gross payment status remains cancelled.

18.   However, if the Tribunal had been of the view that the notice of appeal was valid the appeal would have been dismissed on the basis that the Company had failed the “compliance test” and has not established any reasonable excuse, or even advanced any matter that could be regarded as such, for its failure to comply with its tax obligations.

19.  The hearing having taken place in the absence of the Appellant, the Appellant has a right to apply for this decision to be set aside pursuant to Rule 38 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”).  The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

John Brooks

TRIBUNAL JUDGE

RELEASE DATE: 27 August 2009