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J Scofield v HMRC

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In J Scofield v HMRC (TC00659 – 2 September), a contractor (S) had registered for ‘gross payment status’ within the construction industry scheme in 2008. In January 2010 HMRC cancelled his registration on the grounds that he had failed to pay his tax liability by the due date. He appealed, contending that he had a reasonable excuse because of cash-flow difficulties. The First-Tier Tribunal reviewed the evidence in detail and rejected this contention, finding that he ‘could easily have paid the outstanding tax’ but had ‘simply failed to do so’.

Accordingly, there was no reasonable excuse. However, the Tribunal questioned whether HMRC had exercised its discretion under FA 2004 s 66(1) and also questioned the nature of the jurisdiction given to the Tribunal under FA 2004 s 67(4).

Judge Brannan directed that the case should be relisted for further argument on whether the Tribunal had a full appellate jurisdiction ‘or whether, at least in respect of the exercise of any discretion to withdraw gross payment status, its jurisdiction is confined to determining whether HMRC's decision is flawed by some form of illegality (eg, HMRC took into account irrelevant considerations or failed to take account of relevant considerations or the determination constituted a conclusion that could not reasonably have been reached)’.

Why it matters: HMRC has won the great majority of appeals against the cancellation of ‘gross payment status’. However in this case they were faced with a Tribunal Judge who wished to make deeper enquiries into the specific provisions of FA 2004 ss 66 and 67. The case is to be relisted for further argument.

HMRC are understood to be confident that the limitations which they impose on their officers’ discretion are in accordance with the Ch D decision in Baylis v Roberts & Roberts [1989] STC 693. However the main focus of the rehearing is likely to be the nature of the Tribunal’s jurisdiction (ie, is it merely supervisory or is it fully appellate).

Issue: 1046
Categories: Cases