Month 13 penalty

The taxpayer company had for many years treated its subcontractors as net for construction industry scheme (CIS) purposes. The firm an installer of lightning conductors deducted 20% from each worker’s pay and passed it to HMRC.

The company outsourced its CIS obligations in 2007 to Hudson Contract Services Ltd and stopped engaging subcontractors directly. The taxpayer instead paid its adviser an amount equal to workers’ total pay plus a £15 fee per operative per week.

Hudson had a separate contract with each worker who remained in the CIS and continued to be paid net with the result the taxpayer was liable to less tax.

HMRC undertook a compliance check of Hudson. The department contacted the taxpayer explaining the adviser was net for CIS purposes and that the taxpayer should have continued to deduct and pay 20% tax.

The department imposed fixed penalties of...