[2011] UKFTT 290 (TC)

TC01152

Appeal number: TC/2010/02028

Construction Industry Scheme - Cancellation of registration for gross payment (Finance Act 2004 s.66) – Whether there was a “reasonable excuse” (Finance Act 2004 Sch 11 para 4(4)(a)) – Proportionality - Appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	INDUSTRIAL CONTRACTING SERVICES LTD	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

				TRIBUNAL: Ms. J. Blewitt (Judge)

	
Sitting in public at Derby on 11 April 2011

Mr R. Stanley for the Appellant

Mr P. Oborne, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.	By Notice of Appeal dated 24 February 2010, the Appellant appeals against a decision of HMRC dated 26 January 2010 to cancel the Appellant’s registration for gross payment under the Construction Industry Scheme (“CIS”).
2.	The grounds set out in the Notice of Appeal can be summarised as follows:
(a)	That all other tax payments, totalling £159,227 have been made on time for the preceding 12 months;
(b)	That the Appellant has put procedures in place to ensure payments are made on time due to previous problems with payment;
(c)	That the late payment in this case is an annual payment which falls outside of the normal payment pattern;
(d)	That the late payment was a small amount and the failure was rectified immediately meaning it was only 20 days late;
(e)	That the Appellant has since taken steps to ensure that this failure is not repeated;
(f)	That over 60% of the Appellant’s turnover relates to contracts paid on a gross basis and that the consequences of loss of gross payment status will be that the contracts are lost and the company will be pushed into insolvency.
The legislation

3.	The CIS became effective on 6 April 2007 and is the subject of Chapter 3 of Part 3 (ss.57-77) of the Finance Act 2004, and the Income Tax (Construction Industry Scheme) Regulations 2005, SI 2005 No 2045 (the “Regulations”).
4.	Section 63 of the Finance Act 2004 provides for the registration of an individual or company for gross payment. The requirements for registration for gross payment are dealt with by s.64 of the Finance Act 2004.
5.	Section 66 of the Finance Act 2004 states:
(1)	The Board of Inland Revenue may at any time make a determination cancelling a person's registration for gross payment if it appears to them that—
(a)	if an application to register the person for gross payment were to be made at that time, the Board would refuse so to register him, 
(b)	he has made an incorrect return or provided incorrect information (whether as a contractor or as a sub-contractor) under any provision of this Chapter or of regulations made under it, or
(c)	he has failed to comply (whether as a contractor or as a sub-contractor) with any such provision. 
(2)	Where the Board make a determination under subsection (1), the person's registration for gross payment is cancelled with effect from the end of a prescribed period after the making of the determination (but see section 67(5)).
…
(5)	On making a determination under this section cancelling a person's registration for gross payment, the Board must without delay give the person notice stating the reasons for the cancellation. 
(6)	Where a person's registration for gross payment is cancelled by virtue of a determination under subsection (1), the person must be registered for payment under deduction.
…
(8)	A person whose registration for gross payment is cancelled under this section may not, within the period of one year after the cancellation takes effect (see subsections (2) and (4) and section 67(5)), apply for registration for gross payment. 
(9)	In this section “a prescribed period” means a period prescribed by regulations made by the Board. 
6.	Part 1 of Schedule 11 to the 2004 Act sets out three “tests” which must be satisfied for registration for gross payment of an individual under the CIS; the “business test, the “turnover test” and the “compliance test”.  The conditions in respect of the “compliance test” are:
(1)	The applicant must, subject to sub-paragraphs (3) and (4), have complied with—
(a)	all obligations imposed on him in the qualifying period (see paragraph 14) by or under the Tax Acts or the Taxes Management Act 1970 (c 9), and
(b)	all requests made in the qualifying period to supply to the Inland Revenue accounts of, or other information about, any business of his.
…
(3)	An applicant or company that has failed to comply with such an obligation or request as—
(a)	is referred to in sub-paragraph (1), and
(b)	is of a kind prescribed by regulations made by the Board of Inland Revenue, 
	is, in such circumstances as may be prescribed by the regulations, to be treated as satisfying the condition in that sub-paragraph as regards that obligation or request. 
(4)	An applicant or company that has failed to comply with such an obligation or request as is referred to in sub-paragraph (1) is to be treated as satisfying the condition in that sub-paragraph as regards that obligation or request if the Board of Inland Revenue are of the opinion that—
(a)	the applicant or company had a reasonable excuse for the failure to comply, and
(b)	if the excuse ceased, he or it complied with the obligation or request without unreasonable delay after the excuse had ceased.
…
(7)	There must be reason to expect that the applicant will, in respect of periods after the qualifying period, comply with—
(a)	such obligations as are referred to in sub-paragraphs (1) to (6), and
(b)	such requests as are referred to in sub-paragraph (1).
7.	The “qualifying period” is defined in paragraph 14 of that Schedule as meaning the period of 12 months ending with the date of the application in question.
8.	Section 67 of the Finance Act 2004 states:
(1)	A person aggrieved by—
(a)	the refusal of an application for registration for gross payment, or
(b)	the cancellation of his registration for gross payment, 
	may by notice appeal.

Case Law

9.	The following cases were cited by the parties in support of their submissions:
(a)	Terence Bruns t/a TK Fabrications v HMRC Commissioners [2010] UKFTT 58 (TC)
(b)	Grosvenor v HMRC Commissioners [2009] UKFTT 283 (TC)
(c)	Mutch v HMRC Commissioners [2009] UKFTT 288 (TC)
(d)	Strongwork v HMRC [2009] UKFTT 292 (TC)
(e)	Express Agency v HMRC [2010] UKFTT 55 (TC)
(f)	Getty v HMRC Commissioners [2010] UKFTT 251 (TC)
(g)	Glen Contract Services Ltd v HMRC Commissioners [2010] UKFTT 391
(h)	Connaught Contracts v HMRC Commissioners [2010] UKFTT 545 (TC)

Undisputed Facts

10.	Mr I. Harrison is the Director of the Appellant Company which is a small company providing organisations such as local authorities and NHS trusts with emergency response solutions. 
11.	An annual Class 1A NIC payment was made late by the Appellant; payment in the sum of £361.60 was due on 19 July 2009 but not paid until 8 August 2009. There was no dispute as to the fact that payment was made late and that this was sufficient to constitute a breach of the “compliance test” under paragraph 4 of Schedule 11 to the Finance Act 2004.

Issues

12.	There was no issue that there had been failure to comply with the “compliance test” under Schedule 11 to the Finance Act 2004.
13.	The grounds of appeal relied upon by the Appellant were:
(a)	Whether the fact that the payment was only 20 days late could amount to a reasonable excuse in the circumstances and whether the HMRC officer reviewing the decision had discretion, as indicated by other cases, to apply his own judgment to the case; and
(b)	Whether the decision to cancel the Appellant’s registration for gross payment under the CIS was proportionate, in view of the amount of the late payment and the consequences to the Appellant of the loss of gross payment status.
Evidence and Submissions of the parties

14.	A large amount of correspondence between the Appellant’s representatives, Smith Cooper, and HMRC was provided to me during the hearing, all of which I considered carefully. 
15.	The reason for the late payment was stated, in a letter from Smith Cooper to HMRC and dated 20 April 2020 (clarified by Mr Stanley on behalf of the Appellant at the hearing as 2010), as:
“...we advised our client in June that the payment date was 19 July 2009, and our client accepts that he received the letter, signed the relevant P11D (b) and returned this to us, together with the forms P11D, for us to submit to HM Revenue and Customs. Unfortunately, our client then placed the letter and payslip with other invoices rather than keep it separate.
Ordinarily our client then reviews invoices during the month to determine which of these require paying at the end of the month. Unfortunately, as July was the run up to one of his busiest periods (school summer holidays) these were not reviewed until just after the end of the month, when our client discovered that the Class 1A NIC was outstanding. At this point the payment was sent direct to you and was not delayed any further. The payment being received by you 20 days late.
As I am sure you will appreciate, with small family run businesses the directors do not sit in splendid isolation, and in this case the director is responsible for sourcing work, quoting, managing the work as well as dealing with paperwork, payment of invoices, staff matters, health and safety etc...our client did not intend to make the payment late, but pressure of business as one of his busiest times meant that the payment was unknowingly delayed.”
16.	It was submitted by Mr Stanley on behalf of the Appellant, that the Appellant had queried with his representatives some of the figures due and that the delay in payment came as a result of the delay in response by the accountants to the Appellant’s queries. I found this to be somewhat at odds with the reason set out in the letter of 20 April 2010 as summarised at paragraph 4 above which clearly states the reason for late payment as being an oversight due to the busy period and makes no mention of delay caused by the Appellant querying the figures. Mr Harrison gave evidence to the Tribunal in which he accepted that the late payment was the result of an oversight on his part, but could not recall any further details as to whether a late response by the accountants to his queries formed any part in the delayed payment. 
17.	Mr Stanley submitted that HMRC has discretion to apply its own judgement in such cases and that taxpayers have an expectation that treatment will be even-handed. Mr Stanley referred to a letter from HMRC to Judy Mallaber MP (who had written to HMRC on behalf of the Appellant in respect of a previous failure under the CIS) dated 22 September 2008 in which HMRC stated:
“One essential difference between the current scheme and its predecessor is that compliance failures have been clearly and unambiguously set down in the Legislation. The previous scheme allowed HMRC officers some discretion by making reference to errors which in turn could be considered as either “minor” or “technical”, in which case they could be discounted, based on the particular circumstances of the case. There is no longer any such provision for an officer to use their judgement: officers are required, in every case, to review the potential compliance failures by reference to the letter of the law, and to identify whether each one is a pass or a fail. This, in effect, becomes a matter of fact; not judgement....
Having reviewed the papers I am therefore satisfied that my colleagues have reached the correct conclusion, in that the compliance failures have been clearly demonstrated and, as a consequence, that the Gross Payment Status must be withdrawn...
I am afraid that I cannot see that there are any grounds for the “reasonable excuse” provisions to be exercised...
I have, however, considered the specific circumstances of this case, and I have taken on board the comments made by Smith Cooper as to the likely ramifications if HMRC were to press ahead with the removal of the company’s Gross Payment Status. With this in mind, I propose to hold the withdrawal in abeyance for the time being...
Provided there are no further compliance failures...the company will remain entitled to receive payments without a deduction...”
18.	It was submitted by Mr Stanley that the letter is contradictory in that it refers to there being no power for HMRC officers to exercise discretion, yet goes on to reinstate the Appellant’s Gross Payment Status.
19.	Mr Stanley referred to a number of cases dealt with by his firm which had been provided to HMRC in redacted form, but which, he contended, proved that HMRC officers do have discretion to apply their own judgment. Mr Stanley submitted that the cases set a precedent and that as a result all taxpayers have a legitimate expectation of similar treatment. 
20.	On the issue of proportionality Mr Stanley referred to the possible loss of contracts should the Appellant lose his Gross Payment Status and submitted that the severe consequences to the business and its cash flow would be such as would make it disproportionate to cancel the Appellant’s registration for gross payment on the basis of one relatively small late payment.
21.	Mr Stanley referred to the case of Bruns and submitted that the principle established should be followed:
“We add that we consider that an excuse can arguably be regarded as reasonable by reference to the consequences of the withdrawal of gross payment status. This would be the case where such a withdrawal would, on the facts, be a disproportionate sanction for the non-compliance in question. The fact, which we find, that a withdrawal of gross payment status would be likely to cause the Appellant to lose his livelihood and suffer severe economic loss on the sale or scrappage of his equipment, could render his excuse reasonable on this further stand-alone ground.  These consequences which would be likely to flow from a withdrawal of gross payment status would, in our judgment, be wholly disproportionate to the late payment of tax in this case (for which HMRC were, we assume, in any case compensated in interest).  This factor could well render the Appellant’s excuse reasonable even if, contrary to our findings above, there was no other basis on which his excuse could be held to be reasonable.”

22.	Mr Oborne for HMRC referred me to the internal guidance given to HMRC officers and which is contained in document CISR81020 entitled “Compliance: Overview: Reasonable Excuse.” Mr Oborne properly accepted that the Tribunal is not bound by such a document but submitted that it provides helpful guidance to the officers in considering each case on its merits. Mr Oborne referred to the section entitled “What is not “Reasonable Excuse” which specifically precludes a taxpayer being “too busy running the business” as an acceptable reason for non-compliance.
23.	In respect the letter from HMRC to Judy Mallaber MP dated 22 September 2008, referred to by Mr Stanley, Mr Oborne submitted that discretion had not been used to ignore the lack of compliance by the Appellant, but that the decision had been made to “hold the withdrawal in abeyance for the time being” thus giving the Appellant a further opportunity to ensure compliance. Mr Oborne submitted that by a further failure to meet the requirements of the compliance test, HMRC were entitled to withdraw the Appellant’s Gross Payment Status and that there was no discretion on his part, or that of HMRC, to apply its own judgement in place of the law.
24.	Mr Oborne contended, with reference to a letter from HMRC to the Appellant dated 9 June 2009, that the Appellant had been advised of the payment due in the sum of £361.60 and the fact that it was due by 19 July 2009. Mr Oborne submitted that in light of this reminder, taken together with Mr Harrison’s concession that the late payment was made due to an oversight, there could be no reasonable excuse.
25.	Mr Oborne referred me to HMRC’s guidance form CISR46080 entitled “Register and maintain subcontractor: compliance test: compliance tolerance” which sets out, with reference to Regulation 32 of the Regulations, those failures which can be disregarded. Mr Oborne contended that this guidance, which has its basis in law, is the only discretion available to HMRC officers.
26.	Mr Oborne accepted that he had been provided with redacted cases from Smith Cooper which purported to show that discretion had been used, but stated that without the full details of those cases he was unable to verify them or make further inquires to establish whether there had been any distinguishing factors.
27.	On the issue of proportionality, Mr Oborne submitted that, in addition to the absence of any evidence to support the Appellant’s assertions as to the potential loss of contracts, the well established principles of case law make clear that proportionality is not an issue for the Tribunal. Mr Oborne contended that the Appellant’s argument in respect of proportionality were two-fold; the consequences of loss of Gross Payment Status on cash flow and the consequences of possible loss of contracts. 
28.	Mr Oborne referred to the case of Grosvenor in which the Judge, Dr Staker stated:
“I further find that the consequences of cancellation of gross payment status is not relevant to the issue whether or not there is a reasonable excuse, and that the material before me discloses no other reasonable excuse for the late payments.”
29.	Mr Oborne highlighted the comments of the Tribunal in the case of Strongwork Construction Ltd  in which it was said:
“Mr Harper thought the law unreasonable to remove his gross payment status for 10 fairly minor defaults when the effect of the loss of status might be to put the company out of business.  Mr Harper feared the company could go out of business because it supplies plant and materials as well as labour and a 20% deduction from all payments due to it could cause major cashflow problems as the company would still have to pay for the plant and materials (even though it could set off CIS and PAYE liabilities against the 20%). He also pointed out that the company has now realised the seriousness of the need to comply and had taken steps to ensure that PAYE is now paid on time:  they now pay PAYE by BACS.  Further, he said that it would be of no benefit to HMRC to remove the company’s gross payment status as by putting the company out of business they would lose tax revenue.  Some 22 jobs were at stake. Although he did not phrase it like this, Mr Harper was saying that the penalty was out of all proportion to the defaults.
Unfortunately, our understanding of the law is that we have no discretion to take these factors into account”
30.	Mr Oborne accepted that the case of Strongwork predated that of Bruns, but referred me to the authority of Getty, which post dates both cases and which did not accept that the consequence of a loss of contract was sufficient to amount to reasonable excuse:
“The Tribunal has taken into consideration that the cancellation of Mr Getty’s registration for gross payment status may result in his losing the Viewpoint contract, and therefore have a significant effect on his business.   However it has to be taken into account that there was a material lack of awareness on the part of Mr Getty in regard to his obligation to make his monthly PAYE payment timeously.
For these reasons, the Tribunal finds that HMRC acted in accordance with the provisions of s66 of the Finance Act 2004 in cancelling Mr Getty’s registration for gross payment status, and the appeal is accordingly refused.”
31.	The same Tribunal Judge noted in the case of Glen Contract Services Ltd:
“The Tribunal acknowledges that the withdrawal of gross payment status can have an adverse effect on a company – in that it may convey to others that the company has failed in its tax obligation. The loss of status also affects a company’s cash flow and it is accepted that this in itself may be difficult to overcome, even to the extent of possible liquidation. However, these considerations have always been there with the Construction Industry Scheme, and the legislation promulgated by Parliament has endeavoured to achieve a balance between the interests of the contractor and the public interest. The legislation is clear and unambiguous and it is not open to this Tribunal to reach a decision which would be contrary to the same, however adverse it might appear to be to a party
Mr Smith pointed to the cases of Bruns t/a TK Fabrications and Mutch v R & C Commissioners where the respective contractors had been successful in having their gross payment status restored. However the circumstances in each of these cases were exceptional and neither of these cases establishes a general principle that financial difficulty constitutes a reasonable excuse for a taxpayer’s failure to comply with his obligation to meet his tax obligations timeously...”
32.	Mr Oborne accepted that there are differing schools of thought as to whether the Tribunal can take into account the consequences of withdrawal of gross payment status in determining an appeal, but submitted that the cases cited clearly showed that more recently the Tribunal has held that the consequences are not a relevant consideration. 
33.	Mr Oborne submitted that the law had been correctly applied in this case and consequently there was no discretion on the part of HMRC or any reasonable excuse upon which to allow the Appellant to retain his Gross Payment Status.
Decision
Discretion
Section 66 (1) Finance Act 2004 provides:
"The Board of Inland Revenue may at any time make a determination cancelling a person's registration for gross payment if it appears to them that –...
34.	It is arguable that the use of the word “may” suggests that there is a discretion as to whether gross payment status is cancelled. Alternatively, the statute could be interpreted as requiring the conditions set out in Section 66 (1) (a) to (c) to be met before cancellation can be considered.
35.	 I take the view that once satisfied that one of conditions of Section 66 (1) (a) to (c) has been met, the discretion imparted by the 2004 Act is where:
“(a) the applicant or company had a reasonable excuse for the failure to comply, and
(b)	if the excuse ceased, he or it complied with the obligation or request without unreasonable delay after the excuse had ceased”
36.	This provision allows HMRC to consider the circumstances of any failure to meet the compliance test and, where the breach is not one which falls within the tolerances laid down by the Regulations, allow Gross Payment Status to continue despite the breach where there is deemed to be reasonable excuse.
37.	Reasonable excuse is not defined by legislation, however HMRC Officers follow the guidance set out in documents CISR46600 and CISR81020. The guidance, while not exhaustive, has been followed in a significant number of cases before the Tribunal. 
38.	In reviewing the decision to cancel the Appellant Gross Payment Status, Mr Oborne took into account the guidance and gave consideration as to whether there was reasonable excuse for the Appellant’s non-compliance. The reason given by the Appellant’s representatives was that the payment was delayed due to an oversight brought about by the Appellant’s busy work schedule which was rectified as soon as the Appellant became aware of his mistake. While I am sympathetic to the onerous duties involved in running a business, I agree with Mr Oborne’s conclusion that there was no reasonable excuse, even taking into account the small amount of tax owing or number of days before payment was made.
39.	In the absence of reasonable excuse, I cannot find any other basis upon which it could be arguably said that HMRC ought to have used discretion in this case. 
40.	It is submitted by Mr Stanley that his firm has dealt with previous cases where Gross Payment Status has been reinstated despite clear breaches of the compliance test. A brief and redacted summary of these cases was provided. I take the view that this Tribunal cannot safely act upon such cases without being aware of the full facts or reasons for the decisions. If discretion was used by HMRC officers outside of the legal parameters, of which I cannot be sure without hearing from those officers involved in the decision making processes, I agree with the comments of Judge Aleksander in Express Agency (although different on its facts),  in which he stated:
“The Appellant is correct that HMRC should normally treat taxpayers in identical circumstances in the same way. This is reflected in paragraph 4 of their Charter, which states that they will treat taxpayers "even handedly". However, I cannot treat HMRC's decision in the other case mentioned by the Appellant - of which I have only outline details from the Appellant – as justifying the late paper filing in this case. First, I have been given no evidence to demonstrate that the circumstances...are in fact identical. I do not know if there may be differences between the two cases which justify the different treatment...Secondly, if the two cases are on all fours, HMRC were wrong in allowing the other taxpayer to file a paper return after 31 October 2008 without incurring a surcharge. I cannot allow that "wrong" to justify a further "wrong" in this - and possibly other - appeals.  Any complaint the Appellant may have about HMRC's conduct may be better directed to the Revenue Adjudicator who can consider issues of maladministration – which is beyond the remit of this Tribunal.”
41.	For that reason, I reject the submission on behalf of the Appellant and I find that even if it is the case that HMRC officers have exercised discretion in other cases, I do not accept that a similar – and potentially unlawful – approach would therefore be justified in this case. I do not accept that the Appellant, who would have no prior knowledge of these cases, would have any expectation above or beyond the statutory principles as outlined at paragraph 34 above.
42.	The Appellant highlighted letters of apology from HMRC where mistakes had been made in respect of the issuing of penalty notices. While I accept the Appellant’s submission that his own error was also a mistake, as opposed to a deliberate attempt to defraud the Revenue, I do not find that a mistake by one party can “cancel out” that of another or amount to reasonable excuse.
Proportionality
43.	The issue of proportionality overlaps with the submissions made by the Appellant in respect of discretion. It is submitted that, on the basis that the amount owing of £361.60 was paid only 20 days late, the consequences to the Appellant of removal of Gross Payment Status to his cash flow and potential loss of contracts, is wholly disproportionate.
44.	I find that the cases cited are clear in establishing that the issue of proportionality is not which the Tribunal has any jurisdiction to consider. 
45.	The case of Strongwork Construction Limited clearly stated: 
“...the High Court has ruled, in a decision which is binding on us, that neither HMRC nor we the Tribunal can consider proportionality:  Barnes v Hilton Main Construction [2005] EWHC 1355 (Ch).  In that case the judge considered the Human Rights Act and concluded that it did not require the UK courts to read in a test of proportionality in the gross payment status rules.   The court also thought that in any event the rules were not disproportionate as there was (then) the “minor and technical” exemption (replaced now by the “reasonable excuse” exemption which must be even more likely to be seen as proportionate) and because in the last resort the taxpayer could always seek to recover gross payment status 12 months after it was removed if it could demonstrate compliance”
46.	There was no evidence before me to support the assertion that cancellation of the Appellant’s Gross Payment Status would lead to the actual loss of contracts; the submission made by Mr Stanley was that this was a possibility. Even accepting that this would be the case, in my view the case of Bruns is not decisive on this point:
“The Appellant complied with the obligations imposed on him under section 59A(2) TMA in the ‘qualifying period’ of 12 months ending with 8 February 2008, in that he made both the payments on account due on 31 July 2007 and 31 January 2008 on time.  (As it happens, he also complied with the obligations imposed on him by that provision in the period of 12 months ending with the date of the hearing of the appeal.) 
 Our decision on this point is a sufficient basis for us to allow the appeal.
We add that we are satisfied that the Appellant has also, on the facts, shown a reasonable excuse for his failure to make a payment on account...and that if the excuse ceased before 23 April 2007, he made the payment on account...without unreasonable delay after it had ceased
The reasonable excuse consisted of two elements, each of which we regard as amounting independently to a reasonable excuse.  The first is the inability to make the payment on account without prejudicing his business cash flow. The second element is the stress suffered by the Appellant by reason of his health and other personal problems in the nature of family illnesses.
We add that we consider that an excuse can arguably be regarded as reasonable by reference to the consequences of the withdrawal of gross payment status...The fact, which we find, that a withdrawal of gross payment status would be likely to cause the Appellant to lose his livelihood and suffer severe economic loss on the sale or scrappage of his equipment, could render his excuse reasonable on this further stand-alone ground...This factor could well render the Appellant’s excuse reasonable even if, contrary to our findings above, there was no other basis on which his excuse could be held to be reasonable”(emphasis added).
47.	In the Bruns case, the Tribunal allowed the appeal principally on the basis that the only failure was outside of the qualifying period. The Tribunal also found that reasonable excuse existed. The comments in relation to the consequences of loss of Gross Payment Status are not, in my view, findings of fact upon which the appeal turned, but rather factors upon which the Tribunal had no need to reach conclusions in view of its primary findings.
48.	I find that none of the cases cited establishes a binding principle that cash flow difficulties can amount to a reasonable excuse nor do I find that any exceptional circumstances exist in this case such as those in the case of Mutch.
49.	In conclusion, I do not accept that HMRC could have applied discretion in this case beyond that permitted by statute; and that even if discretion beyond a finding of reasonable excuse can be read into the Act, I do not find any reason in this case sufficient to conclude that discretion should have been used to allow the Appellant’s Gross Payment Status to continue. While I accept that the sum of tax owing was relatively small and that the delay was 20 days, it is significant that the Appellant had experienced previous difficulties of breaches within the CIS and most notably, in a letter dated 31 July 2008 the Appellant’s representatives wrote to HMRC stating:
“Our client is now fully aware of the serious consequences of any compliance failures on his part...and will take every step possible to ensure a future clean compliance record.”
50.	The letter requested reconsideration of the decision to withdraw the Appellant’s Gross Payment Status on the basis that the consequences to his business would be catastrophic and would almost certainly result in the loss of both customers and cash flow. On that occasion, without detailed explanation, HMRC agreed by letter dated 22 September 2008 to hold the withdrawal in abeyance, clearly stating that this was dependant on future compliance. I find that given the next failure took place less than one year later, taken together with the reminder sent to the Appellant on 9 June 2009, that there is no evidence of the Appellant taking “every step possible to ensure a future clean compliance record.”  
51.	The appeal is dismissed.
52.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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: 4 MAY 2011