HM Inspector of Taxes v Transform Shop Office and Bar Fitters Ltd

Whether a compliance failure is minor and technical under the statutory construction industry certificate scheme is a composite, purposive question of fact and degree. The relevant decision-maker must consider whether the failure is sufficiently venial in the context of the statutory purpose, which is to secure strict compliance with tax obligations. Persistent lateness is relevant but is not automatically disqualifying. On an appeal, the Commissioners may substitute their own judgment for that of the inspector. The court may intervene only where the Commissioners’ conclusion is legally impossible or so far outside the range of reasonable conclusions that it constitutes an error of law. The future-compliance requirement is distinct from the question whether past failures were minor and technical.

The Inspector refused the respondent company a Construction Industry Scheme certificate because it had repeatedly paid PAYE late during the three-year qualifying period. The General Commissioners allowed the company’s appeal, finding that the Revenue’s acceptance of the payment pattern, the absence of outstanding tax and the surrounding circumstances supported an informal arrangement and made the failures minor and technical.

The Inspector appealed by way of case stated under Taxes Management Act 1970 section 56(6) and regulation 20 of the General Commissioners (Jurisdiction and Procedure) Rules 1994. The central issues were whether the Commissioners had applied the correct statutory questions and whether their conclusions were legally open to them.

1. Appeal dismissed. The Commissioners’ decision was legally open to them and there was no useful purpose in remitting the case.
2. The phrase minor and technical in section 565(4) of the Income and Corporation Taxes Act 1988 is a composite phrase requiring a purposive construction. It is not a technical expression to be dissected by dictionary definitions. The question is whether the failure is venial in the context of Parliament’s purpose of securing strict compliance as the price of obtaining a certificate.
3. The issue is ultimately one of fact and degree for the Commissioners. Applying the principles in Edwards v Bairstow, the court may intervene where their conclusion is so wide of the mark that it is unsustainable in law. The present case was borderline, but the Commissioners’ conclusion that the repeated late PAYE payments could be regarded as minor and technical was not legally impossible.
4. Following Hudson v JDC Services Ltd, the Commissioners on an appeal under section 561(9) may substitute their own judgment for that of the inspector. The question was therefore not merely whether the inspector’s refusal was legally possible, but whether it was legally possible for the Commissioners to disagree with it.
5. The Commissioners also addressed the separate future-compliance limb of section 565(4), read with section 565(8). Their findings could reasonably be understood as accepting that, had the company appreciated the need for strict compliance, it would have complied in future. Their reasoning was imperfectly expressed but sufficient.

1. High Court (Chancery Division): appeal by way of case stated from the General Commissioners’ decision dated 1 December 2004. The appeal was dismissed.
2. General Commissioners for the Division of Birmingham North: allowed the company’s appeal against refusal of a Construction Industry Scheme certificate.