[2010] UKFTT 321 (TC)

                                                                                                                                                                  Appeal number:   TC/2010/ 02038                    

TC00608

Appeal reference: TC/2010/02038

CONSTRUCTION INDUSTRY SCHEME – partnership changed to Limited Liability Partnership – LLP took on a further partner and changed its year end- appellant relied on accountant to finalise the accounts and advise amount of tax due- accountant failed to appeal removal of gross payment status – further accountants instructed for LLP – LLP suffered a substantial bad debt when MFI went into receivership – appellant alleged reasonable excuse for failure to pay income tax and penalties giving rise to non-compliance –appeal dismissed – no reasonable excuse.

FIRST-TIER TRIBUNAL

TAX

                                                      EUROTEC SERVICES and                                                                                               EUROTEC SERVICES (GB) LLP                                               Appellant

-and-

            The Commissioners for Her Majesty’s Revenue and Customs                 Respondents

Sitting in public in Liverpool on 14 May 2010

Alistair Kendrick of Mazars Chartered Accountants for the Appellant

Timothy Fieldsend instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.     Eurotec Services transferred its business to Eurotec Services (GB) LLP and the two appeals have been amalgamated. It was agreed that the appeal on behalf of Eurotec Services would be adjourned pending the outcome of the present appeal relating to Eurotec Services (GB) LLP (Eurotec).Both appeal relate to the loss of the gross payment status for Mr Dempsey under the Construction Industry Scheme:

(1)  a cancellation of the status whilst a partner of Eurotec Services, and

(2)  a refusal of an application whilst a partner of Eurotec

which decisions were issued on the 27 August 2009 and 1 December 2009 respectively.

This appeal relates to the second appeal mentioned above. Mr Dempsey says that the Eurotec’s failure to comply with the necessary legislation arose from its reliance on its accountant, who failed to advice them with regard to their tax affairs generally, and advised that they should appeal HMRC’s refusal to register Eurotec under the Construction Industry Scheme. In addition Eurotec suffered a substantial bad debt which, coupled with the slow down of the business during the ‘credit crunch’, gave rise to the parties non-compliance. He also indicated that the loss of the gross payment status would lead to the business closing down. The Respondents (HMRC) say that the partners have made late payments of either self-assessment tax and/or penalties due under the Taxes Acts during the qualifying period and do not have a reasonable excuse for their non-compliance.

2.     Mr Alistair Kendrick appeared for Eurotec and called Mark Dominic Dempsey, John Morrison Robert Millar, Richard James Hall and David William Nichols as witnesses, who gave evidence on oath. He also produced a bundle of documents for the tribunal. Mr Timothy Fieldsend appeared for HMRC and produced a further bundle of documents.

3.     We were referred to the following cases:

·       Stephen Mutch TC00232

·       Prior Roofing Limited TC00246

·       The Research & Development partnership Limited TC00271

·       Barnes ( H M Inspector of Taxes) v Hilton Main Construction [2005] BTC 568

·       HMRC v Fame Ltd [2007] BTC 244

·       Arnold ( H M Inspector of Taxes) v G Con Ltd [2007] BTC 44

The facts

4.     Mr Dempsey and Mr Millar started trading as Eurotec Services in 1993. Mr Dempsey held the necessary Construction Industry Certificate. That business ceased on 30 November 2006. The Co-operative Bank, bankers to the partnership, had insisted that the partnership form a Limited Liability Partnership for the protection of the bank and the partners. Further, because of the substantial growth in the business and the lack of credible management figures, the partnerships should change accountants to a more substantial firm than Downham Morris & Co. As a result the partnership instructed Chadwick LLP, who ultimately merged with Mazars LLP in October 2009. The partners arranged for Downham Morris & Co to change the partnership to a Limited Liability Partnership and to continue with their personal tax returns. It appears that the partners had interests in other businesses and that Downham Morris & Co presumably were their accountants for those purposes. Unfortunately Downham Morris & Co failed to realise that in terminating the partnership they would need to apply for a Construction Industry Certificate for the new limited partnership, therefore this was not accomplished. Mazars LLP have suggested that the appeal for Eurotec was protective with the purpose of preventing Eurotec losing access to the gross payment status previously held by Mr Dempsey. Whilst HMRC have not agreed to this approach they have not sought to remove Mr Dempsey’s status. On the creation of Eurotec the year end for the original partnership and Eurotec was changed to bring them in line with another trading business, owned by Mr Dempsey and Mr Millar, DLD Limited. This meant that for the tax year 2007-8, the reporting period was 16 months. During April 2008, Mr Hall was admitted as a third partner and the partnership shares changed. The addition of a new partner added further complexities to the preparation of the accounts by Downham Morris & Co.

5.     Whilst we accept that the alterations led to some complication, we do not believe that the difficulties would be beyond the capabilities of a reasonably competent firm of accountants. It is significant that, in spite of the difficulties which the partners have faced, all of the partners are still using Downham Morris & Co as their personal accountants. We were told that Downham Morris & Co also deals with the other businesses in which Mr Dempsey and Mr Millar are involved.

6.     Eurotec trades with a substantial number of public companies of which MFI was one. In September 2008 MFI went into administration. This was critical for Eurotec as MFI accounted for £1.2 -1.5 million of the business turnover of £6 million at that time. The collapse of MFI caused a bad debt of £300,000. The tribunals have held that there is a reasonable excuse if a substantial amount of business is lost through no fault of the management. Whilst the loss of the MFI business must have been problematical we find ourselves in some difficulty to accept that it amounts to a reasonable excuse for the partners to comply with their tax liabilities. We have been shown neither management nor statutory accounts for the period in question. If the turnover for the year is £6 million then the monthly turnover would be £500,000. The expectation would be that MFI would pay approximately £125,000 each month (1/12 of £1.5 million). This did not appear from the evidence before us to materially affect Eurotec’s cash position. Eurotec was willing to continue to trade with the Phoenix Company, which took over some of MFI’s business. That company went into administration owing Eurotec a further £75,000. As a result, Eurotec was ultimately owed £375,000. We were told that the overdraft, at the time that MFI went into administration, had been £250,000 and that the bank increased the amount to £400,000 then or at a later date. It is not clear when this occurred. Mr Dempsey told the tribunal that the overdraft was increased when MFI went into administration. In his statement, Mr Dempsey’s partner, Mr Millar, stated that the business established financing with the Royal Bank of Scotland. Either way it appears that additional finance was made available. In response to the alleged failure by Mr Dempsey to pay the tax due for his 2002-3 tax liability of £1708.80 (see below), Mr Dempsey  produced a bank statement showing the payment on 29 January 2009. That statement reveals that the bank overdraft at that time was £157,262.22 when the facility was at least £250,000. It appears therefore that the demise of MFI was not sufficiently critical from a cash flow point of view to give rise to a reasonable excuse for the failure by the partners to pay their tax when it became due.  Mr Dempsey confirmed that the facility had been increased to £400,000. The bank would only have agreed such an increase if it believed the business was viable.

7.     The failures giving rise to the refusal to grant gross payment status were as follows:-

Mr Dempsey’s failures

1.     Late filing penalty of £100 for the late personal 2007-8 tax return due to be paid on 24/3/2009 and not paid until 3/4/2009. Mr Dempsey states in his witness statement that he relied on Downham Morris & Co to deal with all his tax affairs and that he was unaware that his tax was due on 31 January 2009. He knew his accountant, Ian Morris, would have received the notice and would have informed him of his tax liability. He paid the penalty as soon as he realised his mistake. Mr Fieldsend suggested to him that he had paid tax many times previously and that he must have known that his first instalment of tax was due on the 31^st January 2009. Mr Fieldsend also pointed out that Mr Dempsey had an income in excess of £250,000 from 5 other partnerships and he must have known that tax was payable on 31 January each year. Mr Dempsey did not deny the other income.

2.     Assessment for 2002-03, £1780.80 due to be paid on or before 24 January 2009. The parties agreed at the hearing that this amount must have been paid by reference to the cheque payment, evidenced through the bank, referred to above.

3.     Balancing payment 2007-08, £22,507.75 due to be paid on or before 31 January 2009 but £19,095.70 remained unpaid on 21 November 2009. An instalment agreement was reached with HMRC on 11 November 2009. In his witness statement, Mr Nicholls indicated that he had provided Ian Morris with the relevant figures from the accounts of the partnership to enable Mr Morris to finalise the tax returns for the partners. He suggested that the partners were completely reliant on Mr Morris and that there were inefficiencies caused by having two accountants and the provision of information between them. As evidence of Downham Morris & Co’s incompetence he pointed out that Mr Morris had received the letter dated 27 August 2009 from HMRC advising Mr Morris that Eurotec’s application for gross payment status had been refused and that he had 30 days in which to appeal. There is no doubt that it was Downham Morris & co fault that this letter was not acted upon. The Partnership would have a reasonable excuse for not dealing with the appeal in time. The error only came to light when one of their customers advised the partnership that they could no longer work together as the partnership had lost its gross payment status. As a resul,t Eurotec instructed Mazars to act Mazars wrote to HMRC on 4 November 2009 to explain Downham Morris & Co’s error and appealed against the refusal of the application. It explained that the completion of the 2007-8 tax return had been dealt with by the former accountants and the partners were unsure why they had not been submitted to HMRC, but would ensure that they were submitted within the next 7 days. They were unsure whether gross payment status had been applied for ,but asked that the matter be dealt with as one of urgency as the loss of the status would cause serious cash flow problems and put 60 people out of work. Significantly, it appears that payment on account of £3412.05 appears to have been paid as the instalment payment was agreed on 11 November 2009 for the balance. We have been given no evidence as to the basis of those instalment payments or for the apparent payment on account. What is significant, however, is that Mazars were able to resolve the outstanding tax position within 7 days although Downham Morris & Co appeared to have been unable to do so for 11 months. We were not told how Mazars were able to deal with the matter so efficiently, but assume that they must have obtained the necessary figures from Downham Morris & Co. We suspect that Eurotec had been advised by Mazars that as the application for the gross payment status had not been dealt with there was every danger, as has happened, that the application for the gross statement status would be refused because of the partners’ non-compliance.

Mr Millar’s failures

1.     Late filing penalty for the late personal 2007-8 tax return due to be paid on 24 March 2009 and paid on 3 April 2009. Mr Millar also relied on the accountant and paid the penalty within 10 days when he became aware it was due.

2.     It was agreed that the late penalty payment of £100 the 2007-8 return was not a default

3.     Assessment due for 2002-3, £1672.80, due to be paid on 31 January 2009 and not paid until 3 April 2009. Mr Millar alleged that, like Mr Dempsey’s cheque, a payment had been made. He did not produce any evidence to that effect and we can only assume that the payment was not made.

4.     Balancing payment for 2007-8, £24,364.48, due to be paid on 31 January 2009 but £21234.66 remained unpaid on 21 November 2009.A payment instalment agreement reached on 14 November 2009. Again it appears that a payment of £3129.82 had been made on account but, as with Mr Dempsey’s payment, we have been given no evidence as to the basis of those instalment payments or for the apparent payment on account. Nor does Mr Millar’s statement assist other than to say that he too relied on Ian Morris.

                       Mr Hall’s failures

1.     Balancing payment for 2007-8, £108, due to be paid on 31 January 2009 and paid 9 March 2009. Mr Hall was made a partner in April 2008 and paid £250,000 into the business as his share of the capital and a further £125,000 for the capital in DLD Limited referred to above. He had previously worked as an employee for Eurotec Services and then Eurotec over the previous 9 years before becoming a partner. He had never failed to pay his tax before and prided himself with his prompt response to any requests from authorities. He had originally paid his tax through the PAYE system and had only paid additional tax on any benefit in kind. He felt sure that he had made the payment on time but had not been able to produce any evidenced to that effect. We accept that in view of the fact that Mr Hall had paid his tax on time in the past we believed that he had made the payment

  The Law

7             Finance Act 2004 sections 57 to 77 deal with the applications and administrations of the Construction Industry Scheme. We are concerned with the compliance test under Part 1 paragraph 4 of Schedule 11 to the Act.

·          Sub paragraph 8 (1) requires that the partners of Eurotec must have complied with all obligations imposed upon them in the qualifying period under the Tax Acts or the Taxes Management Act 1970.

·          The qualifying period is 12 months ending with the date of the application- in this appeal from 22 November 2008  to 21 November 2009

·          Paragraphs 4 (8) and 8 (5) provide that a person is deemed not to have complied with an obligation if he did not do so on time.

Under Schedule 11 paragraphs 4, 8, 12, and 14 of Finance Act 2004 during the qualifying period (the 12 months prior to the date of application) the business must have:

·                         Completed and returned all tax returns;

·                         Supplied any information to do with tax that has been requested;

·                         Paid all tax /NIC due as an individual, business and employer, both in the UK and overseas, and

·                         Paid any deduction due as a contractor under the construction industry scheme

It is not sufficient that a business brings its tax affairs up to date prior to making an application, as the following two requirements must be demonstrated:

·      It is expected that the tax affairs of the business will remain up to date in the future, and

·      Throughout the qualifying period the business must have run its tax affairs on a timely basis. There must have been:

o      no failings other than the exceptions listed below

o     A reasonable excuse for any failure, and the failure must be rectified  without unreasonable delay after the excuse ceased

The failures which can be disregarded are contained in the Income Tax (CIS) Regulations 2005 Regulation 32.

Paragraph 4 (4) provides that a failure may be disregarded if the applicant had a reasonable excuse for the failure to comply and remedied that failure without unreasonable delay after the excuse had ceased.

Paragraph 4 (7) and paragraph 8 (4) lay down a further test for Eutrotec and the partners. There must be a reason to expect Eurotec and the partners, will comply with the obligations in respect of the periods after the qualifying period.

Submissions

8.     Mr Fieldsend submitted that the Scheme was altered in April 2007 and all relevant taxpayers were notified. The failures cannot be ignored unless the partners had a reasonable excuse for all the failures and resolved them without reasonable delay once they had been identified. This they have failed to do. The partners say that they relied on their accountants, Downham Morris & Co, for what was a complicated set of tax affairs. The Partners chose to change the partnership to a limited partnership and to invite Mr Hall to become a partner. They cannot rely on the accountant’s failures in these circumstances since it would appear to be a contradiction for the partners to allege the failure of Downham Morris & Co to deal effectively with their tax requirements yet to continue to use the same firms services.. The partners have been operating within the construction industry regime for many years and they are familiar with the procedures on a company basis and for their personal tax affairs. They must also have been familiar with the due dates for the payment of their income tax and in view of the various changes, they should have shown more care and attention to their affairs. Mr Kendrick has referred to various cases. In Stephen Mutch TC00232 Sir Stephen Oliver allowed Mr Mutch’s appeal on the grounds that he had done all that a reasonable businessman would have done in his circumstances. HMRC do not accept that the partners of Eurotec acted as reasonable businessmen. Their personal tax position was only resolved in November, and then within 7 days of Mazars becoming aware of the problem. This was almost immediately prior to the date of the application for gross payment status, which reduces the relevance of that action in relation to this appeal. In The Research & Development partnership Limited TC00271 the appellants’ accountants had failed to provide information, arising from a section 20 Taxes Management Act 1970 request, which the appellants could not reasonable have been expected to provide. As the request was not straightforward the appellants had a reasonable excuse in relying on their accountant. In this appeal the partners were relying on the accountants to provide details of their personal tax liability. Something the accountants had been doing for many years. The partners are still content to rely on Downham Morris & Co to continue to advise on their personal tax affairs. In those circumstances the accountant’s failure cannot amount to a reasonable excuse. Reasonable competent businessmen would have ensured that their accountants dealt with their affairs efficiently. The partners also rely on the fact that MFI went into liquidation owing them in excess of £375,000. In The Research & Development partnership Limited TC00271 the appellant had suffered a 75% reduction in its turnover and was unable to obtain any further funding from its bank, which indicated that, it could not support the building trade during the recession. The failure in Eurotec’s case is that the partners have failed to pay their personal tax liabilities. In view of their income from their other businesses they were in a position to make the payments on time. It is also necessary to consider whether the partners will be compliant in the future under the ‘reason to expect’ provisions of paragraphs 4 (7) and 8 (4), Schedule 11 FA 2004. In the period from 2003   to date Mr Dempsey and Mr Millar have failed to make numerous payments on time as set out at folio B 17 to 18 in the bundle. The folio identifies extensive failures both in relation to balancing payments in some cases in excess of £20,000 to £75,000 and consequential penalties and surcharges. For the current position, as at 15 April 2009,  Mr Millar has several unpaid interest charges dating back to February 2010. He also entered into a ‘time to pay’ arrangement but failed to meet the payment schedule by making the final payment 7 days late. Mr Hall and MR Dempsey have no existing failures. Given the history of defaults HMRC can find no reason to expect that all the partners will comply with the required obligations in the future.

9.     Evidence has been produced from the partners’ customers that those customers will cease to trade with Eurotec if the partners lose their grosz payment entitlement. There have been several cases brought by way of appeal from previous decisions of the General Commissioners. In Barnes (H M Inspector of Taxes) v Hilton Main Construction [2005] BTC 568 the General Commissions accepted that the defaults were not ‘minor and technical’ as required by the earlier legislation. They concluded, however, that as the appellant would have to close down their business the loss of their status would be disproportionate and inequitable. On appeal  Lewison J stated at paragraph 23:-

“I consider that the General Commissioners’ application of a test of proportionality was not a test that the legislation allowed them to make”

Similarly in HMRC v Fame Ltd [2007] BTC 244 the appellants claimed that HMRC’s decision would result in lost business and a consequential loss of jobs. Parks J at paragraph 33 stated:-

            “But, whether the rules are reasonable or unreasonable, they are undoubtedly the rules which parliament has laid down and neither the Commissioners nor the Courts on appeal have any power to dispense a company, with whose case they sympathise, from the consequences of them”.

HMRC contend that this is a relevant rebuttal to the grounds of appeal relating to the claim that HMRC actions amount to 1 unreasonable punishment’. The tribunal are asked to reject the appeal and to confirm the decision to refuse the application for the gross payment status

10.  Mr Kendrick submitted that whilst the partners of Eurotec do not dispute that there have been failures in the tax compliance of the members of Eurotec it is a matter of concern that what are insignificant failures will lead to the closure of the business with the resulting job losses. The partners have relied upon their accountants Downham Morris & Co who had responsibility for the tax assessments for  the partnership and then Eurotec. Their tax liability was calculated by the accountants and the partners made such payments as they were advised. Further, the failure of MFI caused considerable difficulties for the company. That loss, coupled with the severe restriction in business arising from the recession, has led to the partners having insufficient cash to pay their tax liabilities. Reference has been made to Stephen Mutch TC00232 and Prior Roofing Limited TC00246. In the latter case :-

            “The tribunal finds that the circumstances relating to the exceptional and extraordinary trading conditions it experienced coupled with the unhelpful banking environment, which prevailed during the review period and which the Appellant company faced, taken together constitute a reasonable excuse for its failure to make the payments due within the review period, by their retrospective due dates and that the excuse continued throughout the review period”.

Reference was also made to the case of The Research & Development partnership Limited TC00271 the appellant was left exposed by the failure of its advisers.  It was accepted by the tribunal that there was a “reasonable excuse” given the complexity of the issues, it was unreasonable to expect the taxpayer to understand what was required to satisfy the needs of the Revenue. Whilst it is true that the rules have changed and the partners were used to the previous provisions, the rules changed significantly in 2007. Prior to 2007 it was normal Revenue practice to defer the issue of a certificate (equivalent to gross status) until all the tax affairs were up to date. It was not their policy to withdraw the certificate during its life. In addition there have been significant complaints from across the construction industry as this change in Revenue approach was not significantly broadcast. The Revenue have suggested that under the ‘reason to expect test’ that there have been a number of unpaid payments on account by the partners. It is the case that the members made payments on account based on the advice of their tax advisers. Section 59 A Taxes Management Act 1970 permits the taxpayer to vary the payments on account if there is a genuine reason for the reduction. It is believed that the advisers considered the payment request to be excessive and therefore payment was made which corresponded to the likely proposed liability.

Mr Nicholls has in his evidence indicated that the loss of the gross payment status would mean that Eurotec would cease to be a viable company. It is submitted that the level of failures are not significant when compared with the impact on the business.. Mr Kendrick considered that Eurotec had a reasonable excuse for its defaults and that the appeal should be allowed.

The decision

11.   We have considered the facts and the law and we dismiss the appeal. The new regulations were introduced in April 2007. The regulations arose, in part, because some General Commissioners had decided that taxpayers could retain their certificates as the non-compliance and been only ‘minor and technical’ under the old law. See Arnold ( H M Inspector of Taxes) v G Con Ltd [2007] BTC 44; and HMRC v Fame Ltd [2007] BTC 244. In fact the principle reason that the General Commissioners found that the defaults were only ‘minor and technical’ was because the taxpayers would have had to cl;ose their businesses if the General Commissioners had found otherwise. As a result there is now very little opportunity to find in favour of a taxpayer under the new compliance test because of the strict exceptions, which are set out above. As a result the partners are non-compliant within the terms of the regulations. Paragraph 4 (4) allows an overarching exemption, if a taxpayer can show that he had a reasonable excuse and that he remedied the position as soon as the reasonable excuse finished. The partners allege that the MFI liquidation and the recession have caused them serious cash flow problems, to the extent that they were unable to pay their tax liability. In fact the MFI liquidation was resolved by either their existing bank or the Royal Bank of Scotland providing suitable finance. We note that in Mr Dempsey’s defence of the tax payment he had made of £1708.80 he has produced a copy of Eurotec’s bank statement at 29 January, when the tax was due. This showed an overdraft on that date of £157,262.22. It was unclear what the overdraft facility was at that time. We were told it had been increased to £400,000 but we are not sure when that decision was made. Even assuming that the facility was the original overdraft facility of £250,000 there was just under £100,000 available to meet the total outstanding tax liabilities of £48,650.03. We were told that Mr Hall had introduced £250,000 into this business in April 2008 and a further £125,000 at the same time into DLD Ltd. We have not been shown any accounts, so that we do not know whether that money was paid into the business as capital or drawn out by Mr Dempsey and Mr Millar as part of their capital entitlement. Either way, there was a further sum of £375,000 available in April 2008 to finance the business, which presumably was still available to assist with both the results of  MFI liquidation and the reduction of cash flow caused by the recession. We do not accept that the partners had a reasonable excuse, based on the lack of funds, for their failure to pay their tax liabilities ion time. The facts in Stephen Mutch TC00232 and Prior Roofing Limited TC00246 were quite different to the position of the partners in this appeal.

12.  The partners also allege that their difficulties arose because of the formation of the LLP, the introduction of Mr Hall as a partner and the change of the year end. They say that their situation was caused by Downham Morris & Co inability to assess their tax liability on time. Mr Dempsey accepted at the appeal that he had other income. Both Mr Dempsey and Mr Millar indicated that they had been in business for some time. They must, therefore, have known that they needed to pay their tax at the end of January. They should have enquired of their accountant as to the amounts due. At best they could have paid the amount that they had paid the previous year. They chose to pay nothing. Mr Kendrick relies on the case of The Research & Development partnership Limited TC00271 for the proposition that the partners had relied on their accountant. In that case an answer was required to a section 20 TMA 1970 notice, which it appears only the accountant could provide. The partners in this appeal relied on the accountant to deal with their normal tax returns and the accounts for the new business. These were not so exceptional that the partners could not make enquiry of their accountant as to what their liabilities were likely to be even if the exact figures were not known. It is significant that Mr Nicholls, of Mazars, appears to have made the accounts for Eurotec available to Downham Morris & Co in adequate time. It is even more significant that Mr Nichols was able to identify the amount of tax within 7 days of the partners finding out that Downham Morris & Co had not appealed the application for the gross payment status. In spite of the error by Downham Morris & Co in relation to that application, the partners said at the tribunal that they intended to continue to employ Downham Morris & Co, which hardly indicates that they believed the accountants were incompetent or to blame for their defaults. We accept that the partners had a reasonable excuse for not appealing the application in time, but that has no bearing on their non-compliance, which had happened a long time previously. We believe that the payments were made expeditiously through Mazars insistence because Mr Nicholls appreciated that the failure to pay their tax on time could well prejudice the application for the gross payment status.

13.  The decision in Barnes (H M Inspector of Taxes) v Hilton Main Construction [2005] BTC 568 and HMRC v Fame Ltd [2007] BTC 244 makes it clear that if a company may have to close, with the consequential loss of jobs, it is not a matter which can be taken into account. We therefore cannot accept that the closure of Eurotec and the subsequent loss of jobs can be taken into account. This is neither disproportionate nor contrary to the scheme. The gross payment status is an exemption to the usual rule for the collection of tax, and the regulations require the companies, that wish to take advantage of the scheme, must comply with those provisions. There are many sub-contactors, who manage to comply with the regulations, and it would make a nonsense of the scheme if sub-contractors could avoid their responsibilities simply because they might go out of business. For all the above reasons we dismiss the appeal.

14.  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.

TRIBUNAL JUDGE

RELEASE DATE: 8 July 2010