HM Inspector of Taxes v G-Con Ltd

Strict compliance with tax obligations is the price of obtaining a construction industry scheme certificate under the Income and Corporation Taxes Act 1988. The two conditions for treating a failure as minor and technical are separate. The past failure must be minor and technical, and it must not give reason to doubt future compliance. Relevant failures may be considered together, including repeated late payments. Compliance with unrelated tax obligations cannot alter the character of the particular failures. Culpability may be relevant in an appropriate case. On a case-stated appeal, intervention is justified where no reasonable tribunal properly instructed could have reached the decision, or where irrelevant matters were taken into account.

G-Con Limited applied to renew its construction industry scheme certificate. The Revenue refused the application because PAYE tax and National Insurance contributions had repeatedly been paid late. The General Commissioners allowed G-Con’s appeal and reversed the refusal.

Mann J allowed the Inspector’s appeal, holding that the Commissioners could not reasonably have treated the defaults as minor and technical. G-Con brought a second appeal to the Court of Appeal. The principal issues were the scope of the High Court’s jurisdiction, the meaning of minor and technical failures, the relevance of G-Con’s wider tax compliance and culpability, and the relationship between the past-failure and future-compliance conditions.

Appeal dismissed. The Court of Appeal unanimously upheld Mann J’s decision that the General Commissioners could not reasonably have found G-Con’s defaults to be minor and technical.

1. Appellate jurisdiction. The High Court was not entitled simply to substitute its own view for that of the Commissioners. Applying the principles in Edwards v Bairstow [1956] AC 14, it could intervene where the only reasonable conclusion on the facts was inconsistent with the Commissioners’ determination, or where irrelevant considerations had been taken into account. Mann J had applied that approach and had not conducted a fresh factual evaluation.
2. Statutory structure. Sections 565(3) and 565(4) of the Income and Corporation Taxes Act 1988 impose strict compliance, subject to an exception for failures which are both minor and technical and do not give reason to doubt future compliance. The first condition concerns past failures. The second concerns future conduct. The first condition must not be construed by reference to the second.
3. Minor and technical failures. All relevant failures may be considered together. The repeated late payments in this case were significant and consistently outside the statutory timetable. The Revenue’s guidance did not create an automatic tolerance for payments made within 14 days of the due date. Compliance with other tax obligations could not transform the PAYE and National Insurance defaults into minor and technical failures.
4. Other considerations. The absence of a warning, earlier grants or renewals of a certificate, and comparison with the facts of Shaw v Vicky Construction Limited [2002] STC 1544 did not answer the statutory question. Each case had to be decided on its own facts. Culpability could be relevant in an appropriate case, but it was not relevant on these facts, where G-Con had been consistently in default.
5. Authorities and final order. The Court approved the purposive account of the scheme in Templeton v Transform Shop Office and Bar Fitters Limited [2005] EWHC 1558 Ch. It held that the approach in Cormack v CBL Cable Contractors Limited [2005] EWHC 1294 Ch, insofar as it conflated the two statutory conditions or treated wider tax compliance as relevant to the first condition, was wrong in principle. The issue of future compliance therefore did not need to be determined. Appeal dismissed.

• Court of Appeal (Civil Division) — dismissed G-Con’s second appeal: [2006] EWCA Civ 829.
• High Court, Chancery Division — Mann J allowed the Inspector’s appeal from the General Commissioners.
• General Commissioners for the Flaxton Division — allowed G-Con’s appeal and reversed the Revenue’s refusal to renew the certificate.