RMF Ltd v HMRC: Upper Tribunal clarifies the limits of the Tribunal’s jurisdiction when reviewing decisions to withdraw Gross Payment Status
In RMF v HMRC the Upper Tribunal found fundamental errors in the FTT decision to uphold RMF’s appeal against a determination cancelling its Gross Payment Status (GPS) under the Construction Industry Scheme (CIS). The UT set aside the FTT decision and dismissed RMF’s appeal. In so doing, it provided helpful clarification as to the limits of the Tribunal’s jurisdiction when reviewing cancellation decisions under s. 66 Finance Act 2004. Bayo Randle successfully represented HMRC.
HMRC decided to withdraw GPS from RMF Construction Services Ltd (RMF) in 2012 as a result of late filings and late payment in respect of corporation tax.
RMF appealed HMRC’s decision. The appeal was not, however, heard by the FTT until 2020, having been stayed behind the leading case of JP Whitter (Water Well Engineers) Ltd v HMRC [2018] STC 1394. In the interim, RMF continued to benefit from GPS and had remained substantially compliant with the CIS requirements.
The FTT determined that it would be disproportionate to withdraw GPS from RMF 8 years after the initial cancellation decision. The UT disagreed, finding that the relevant question was whether HMRC’s decision was justified “as at the time it was made”; it was, and the taxpayer accepted this. Taking the delay into account gave RMF an unfair and unintended advantage over non-compliant taxpayers who had not appealed; their GPS status would be withdrawn immediately and they would be unable to re-apply until a year had passed since the withdrawal of GPS. The FTT had not appreciated this unfair advantage, nor the deterrence objectives within the regime.
The FTT had also failed to acknowledge that, because the CIS regime as a whole was proportionate (confirmed in Whitter), it was only in exceptional circumstances that the proportionality of an individual decision could be challenged. There were no exceptional circumstances in this case and some of the factors relied upon by the FTT (risk of commercial failure or additional administrative work) were matters extraneous to the CIS regime; Whitter had confirmed that extraneous matters could not be taken into account.
Click here to read the full decision.
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