HM Inspector of Taxes v JDC Services Ltd.

Applicants for a construction industry scheme certificate must satisfy two separate requirements where there has been past non-compliance. The failures must be both minor and technical, and must not give reason to doubt future compliance. A general expectation of future compliance is insufficient if a residual reason for doubt remains. On an appeal under section 561(9), the General Commissioners have a full appellate jurisdiction. They may rehear the entitlement question and substitute their judgment for that of the Revenue, while applying the statutory criteria. On a case stated under section 56(6) of the Taxes Management Act 1970, the High Court may make consequential orders, including cancelling a certificate issued in error.

The Revenue appealed by way of case stated under section 56(6) of the Taxes Management Act 1970 against the General Commissioners’ decision allowing JDC Services Ltd’s appeal from the refusal to issue a construction industry scheme certificate.

JDC had made repeated late PAYE and construction industry scheme payments, had outstanding corporation tax for periods, and had filed returns late. The Commissioners considered that JDC had made sustained efforts to regularise its affairs and would comply with future obligations. The appeal concerned the construction of section 565 of the Income and Corporation Taxes Act 1988, the Commissioners’ appellate jurisdiction under section 561(9), and the High Court’s power to cancel the certificate.

1. The appeal was allowed. The Commissioners’ decision contained errors of law and could not stand.

2. Section 565(4) imposed two cumulative requirements in a case involving past non-compliance. The failures had to be both minor and technical, and had to give no reason to doubt that the applicant would comply with the future obligations specified in section 565(8). The alternative construction advanced by JDC would remove words from the subsection and was inconsistent with the statutory policy requiring a good compliance record.

3. The Commissioners had expressly found that JDC’s failures were not minor or technical. They had therefore failed to apply the first requirement. They had also applied only the section 565(8) expectation of future compliance and had failed to address the distinct question whether the past failures gave reason to doubt that compliance. Their decision was consequently flawed on both grounds.

4. Section 561(9) conferred a full appellate jurisdiction on the Commissioners. The word “review” had to be read in its statutory and historical context. The Commissioners could rehear the entitlement question, give appropriate weight to the Revenue’s decision, and substitute their own judgment. The decision did not fail merely because the Commissioners had proceeded on that basis.

5. The concluding words of section 56(6) of the Taxes Management Act 1970 empowered the High Court to make consequential orders in relation to the matter. That power included cancelling a certificate which had been issued following an erroneous Commissioners’ decision. The CIS Certificate was therefore quashed.

The judgment records an appeal by way of case stated from the General Commissioners for the Division of Rochford. The Commissioners had allowed JDC’s appeal against the Revenue’s refusal to issue a CIS Certificate. The High Court allowed the Revenue’s appeal and quashed the certificate.