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The taxpayer a sole trader was in business as a construction subcontractor. In 2002 he transferred his firm to a limited company.
The issue concerned his payments: at the end of a contract he would make an application for payment to the main contractor. This would be based on an assessment made by a quantity surveyor employed by the taxpayer.
Within a week or so of the payment application the contractor’s quantity surveyor would inspect the work. The contractor would then issue a valuation certificate based on its quantity surveyor’s assessment. Payment would generally be made 30 days after the application for payment and about two weeks after the issue of the valuation certificate.
The taxpayer’s accountant took the view that income would not be recognised until the valuation certificate was issued. HMRC opened an enquiry into the...
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