In two cases before the First Tier Tribunal (FTT) John Kerr Roofing v HMRC TC02564 and Terry Daniel v HMRC TC02565 two building industry contractors made successful appeals against HMRC's decision to withdraw their gross payment status under the Construction Industry Scheme (CIS).
In John Kerr the FTT found that the withdrawal of gross payment status would probably lead to bankruptcy and unemployment of the firm's subcontractors. It found that HMRC had missed certain important cases when preparing the case bundle which although was probably not "deliberate" seemed careless. It relied on (amongst other cases, Terence Bruns t/a T K Fabrications v HMRC  UKFTT 58 (TC), where it was found that a withdrawal of gross payment status would be likely to cause the Appellant to lose his livelihood and suffer severe economic loss on the sale or scrappage of his equipment. Judge Walters QC said, at :
"These consequences which would be likely to flow from a withdrawal of gross payment status would, in our judgment, be wholly disproportionate to the late payment of tax in this case (for which HMRC were, we assume, in any case compensated in interest). This factor could well render the Appellant's excuse reasonable even if, contrary to our findings above, there was no other basis on which his excuse could be held to be reasonable."
The FTT went on to consider what power it had in relation to the appeal and decided that the exercise of its discretion under s 66 of the Tax Management Act 1970 is a function of HMRC and the decision to cancel a person’s registration for gross payment status a relevant decision it must necessarily follow that under s 67(4) of the Act the Tribunal has jurisdiction to review any relevant decision taken by HMRC in the exercise of that function.
The Tribunal then allowed Mr Kerr's appeal.
In the second case Mr Daniel was found to have a reasonable excuse for the late payment of tax which had led to the withdrawl of gross payment status. This included the withdrawl of his overdraft facility by the bank, the business failure of his associate and the death of his daughter. His wife had also contacted HMRC's business support unit.
The FTT said that it had "...tremendous sympathy for the appellant. We found the appellant and his wife to be sincere and honest." However due to the nature of the events the taxpayer had not made HMRC fully aware of his situation. The FTT went on to say that it is required to consider what a reasonable competent businessman would have done in a similar situation. A reasonable competent businessman is taken to have exercised reasonable foresight but it found that the chain of events causing the appellant to default was not something which he could ever have foreseen. His appeal was allowed.