Scotts Glass and Glazing Services

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30 September 2011

In Scotts Glass, the First Tier Tribunal determined an appeal in relation to a compliance issue arising from the submission of a tax return for the Construction Industry Scheme (CIS).  

Background
CIS is a tax deduction scheme whereby tax is deducted at source from certain payments relating to construction work. There is an obligation under CIS to make a monthly return of any amounts deducted from payments by a contractor to a subcontractor. The contractor deducts tax from the amount actually paid to the sub-contractor less any VAT charged by the sub-contractor and the cost of any materials.  

Facts
Regulation 4(1) of the Income Tax (CIS) Regulations 2005 provides that "a return must be made to the Commissioners for Her Majesty's Revenue and Customs in a document or format provided or approved by the Commissioners". Scotts Glass submitted a photocopy of an original return duly completed to HMRC. Invoking Reg 4(1), HMRC stated that returns made on photocopies are unacceptable. As a result HMRC argued that Scotts Glass were liable for penalties of £1,500 for failing to deliver the relevant returns on time.

Judgement
The Tribunal argued that it is quite clear in Regulation 4(1) that a return must be made "in a document or format". It is also clear that if HMRC provide a document to be used as a return, then they must have approved its format.  Thus the format of an original return is approved. That means that the format of a copy of that document is also approved. A submission of a document which is a photocopy of an original return must therefore comply with Regulation 4(1). Scotts Glass' appeal was therefore allowed.  

Analysis
It is clear from this judgement that is it acceptable to submit photocopies of tax returns under CIS to the Revenue. This case may also have implications for other HMRC schemes requiring the submission of tax returns, with regards to whether photocopies of returns are acceptable as an "approved format" and therefore accepted by HMRC.

If you have any queries, please contact Natalie Stoter on natalie.stoter@burges-salmon.com.

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