Transferring CIS liability to subcontractors

Mr O was a painter and decorator who also installed flooring fitted kitchens and bathrooms and constructed outdoor decking. He engaged subcontractors but failed to deduct tax on the payments to them or to account to HMRC for the amounts that should have been deducted. HMRC opened an enquiry and raised determinations on him under the Income Tax (Construction Industry Scheme) Regulations SI 2005/2045 reg 7.

Mr O applied under SI 2005/2045 reg 9(5) to relieve him from liability on the grounds that the subcontractors would have made returns and paid tax on the amounts received. HMRC accepted that some subcontractors had paid tax and issued decision notices reducing the sums payable. Finally it issued formal determinations under reg 13(2). Mr O appealed on the basis that it was unfair that he should have to pay tax on amounts that the subcontractors would also have paid...