Case: CIS late filing penalties significantly reduced because of special circumstances

[2018] UKFTT 0744 (TC)

Judge Robin Vos

Decision released 18 December 2018

Construction industry scheme – Penalties for late filing of CIS returns – TMA 1970, s. 98A – FA 2009, Sch. 55 – Proportionality – Special circumstances – Reasonable excuse – Effect of FA 2009, Sch. 55, para. 17(3) – Appeal allowed in part.

Advanced Scaffolding (Bristol) Ltd [2019] TC 06877


Advanced Scaffolding (Bristol) Ltd (the appellant) had inadvertently failed to submit monthly construction industry scheme (CIS) returns in relation to two suppliers for 28 months. HMRC issued late submission penalties of £3,000 pursuant to TMA 1970, s. 98A for 2009 and 2010 and £19,600 pursuant to FA 2009, Sch. 55 for 2012-15.

The appellant appealed against the penalties.

The FTT found that the penalties had been correctly charged and calculated. In particular, in relation to the penalties charged under FA 2009, Sch. 55, para. 10 and 11, where the penalty was the greater of 5% of the tax in question and £300, the FTT did not accept the conclusion in the FTT decision of Jagger [2018] TC 06774. In that case the FTT decided that, although the penalty under Sch. 55, para. 5 and 6 (which were very similar to those in para. 10 and 11) might be a fixed amount of £300, it was still ‘determined by reference to a liability to tax’ as it had to be confirmed that 5% of the tax was less than £300. The result was found to be that Sch. 55, para. 17(3) was engaged and the penalties could not exceed the relevant percentage of the liability to tax. In this case the FTT concluded that the reference in Sch. 55, para. 17(3) to a penalty which was determined by reference to a liability to tax was to a penalty which was actually calculated as a percentage of an amount of tax and not to a situation where the penalty which was charged was the fixed minimum of £300.

The FTT found that in accordance with the Upper Tribunal in R & C Commrs v Bosher [2013] BTC 2,126, it had no power to reduce or mitigate the penalties on the basis that they were unfair or disproportionate.

The FTT rejected the appellant’s arguments that it had a reasonable excuse for failing to submit the returns. The appellant had argued that the appellant’s sole director made a genuine mistake for which she was contrite and which had led her to undertake relevant training, and that the mistake was a reasonable one given the complexity of the CIS rules and the director’s genuine belief that the suppliers were supplying materials and not labour.

In relation to the issue of special circumstances, the FTT found that HMRC’s decision was flawed in a judicial review sense as they had not considered all of the relevant circumstances. The FTT concluded that it should consider all of the facts of the case and then to decide whether, taken as a whole, those facts constituted special circumstances which made it right to reduce the penalty in question. Applying that approach, the FTT concluded that, the circumstances were sufficiently special to justify a reduction in the amount of the penalties because:

there were multiple defaults leading to multiple penalties deriving from a single mistake;

there was a genuine mistake;

the appellant had a good compliance record; and

the amount of the deductions which should have been made was minimal.

The FTT noted that the latter three points, on their own, did not constitute special circumstances. They were however part of the overall picture which made the circumstances as a whole sufficiently special to justify a reduction in the amount of the penalties.

As the appellant had been subject to a penalty of £3,000 under the previous penalty regime, the FTT decided to reduce the penalties under Sch. 55 to nil so that the total penalty payable was £3,000. There was in the FTT’s view no reason for the aggregate amount of the penalties to exceed the penalty-cap suggested in para. 13 (even though the appellant did not fall within this paragraph).

The FTT therefore concluded that special circumstances justified a reduction in the amount of the Sch. 55 penalties to nil and confirmed the £3,000 of penalties charged under TMA 1970, s. 98A.


The FTT found that the late filing penalties had been correctly charged and calculated, and in so doing rejected the FTT’s conclusion in Jagger [2018] TC 06774, regarding the interaction of penalties.

However, the FTT found that the £22,600 of penalties charged should be capped at £3,000 because all the penalties related to the same original cause.

For commentary on CIS late filing penalties, see In-Depth at ¶283-300.

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