United Kingdom
25 May 2011 - HMRC to amend CIS cancellation of gross status procedure
In the recent Scofield v HMRC case, the First Tier Tribunal ruled that under the Construction Industry Scheme (CIS) legislation, HMRC has discretion as to whether to cancel a subcontractor's registration for gross payment, and that the issue of computer-generated determinations following a failure to pass the annual automated tax treatment qualification test did not fulfil the requirement to exercise its discretion.
The Tribunal noted that the exercise of discretion involved giving reasoned consideration on an individual basis, and allowed the taxpayer's appeal against the automated issue of a determination cancelling his gross payment status.
We understand that HMRC does not intend to appeal against this ruling, and is instead to change its procedures, stating “We are presently making a small change to our process to enable it to conform with the Judge’s interpretation of the legislation at Section 66(1) Finance Act 2004. This change will involve the application of a level of discretion before we issue the CIS308 letter to a subcontractor where our view remains that the subcontractor should, on this occasion, have gross payment status removed.”
We await the detailed guidance which HMRC will no doubt shortly issue regarding this change.
Please contact Alison Hawkes for further information, or for assistance in connection with the cancellation of a subcontractor's gross payment status.