Reasonable care

KEY POINTS

• Income Tax (CIS) Regulations 2005 reg 9 and genuine error.
• Taxpayer deducted the wrong rate of tax.
• First-tier Tribunal agreed the mistake was made in good faith.
• HMRC may not share the tribunal’s view.

There is much debate in the tax press about the point of reasonable excuse but there seems to be some ignorance on the specific rules in the construction industry tax regulations.

In particular the Income Tax (Construction Industry Scheme) Regulations 2005 reg 9 permits HMRC to excuse the contractor from a tax liability if he can show that the failure to make a deduction arose from an error made in good faith and that he took reasonable care to comply with the rules (see also HMRC’s Compliance Operational Guidance at COG909360).

In my experience if HMRC...