HMRC fails in legal battle with recruitment construction business

The recruitment business' appeal was allowed in full, after HMRC failed to argue that it did not take reasonable care regarding the need for Construction Industry Scheme (CIS) deductions.

Harbron Recruit's tax affairs were "checked" by HMRC in October 2020, which concluded that it should have applied CIS on all payments to agencies, as this represented a contractor/sub-contractor relationship.

Harbron Recruit asked for a direction under Regulation 9 of the CIS Regulations, meaning if it met conditions A or B it would not be required to pay the related shortfall in the CIS due.

Essentially, condition A requires that the taxpayer took reasonable care and the failure to deduct CIS was an error; condition B requires that the agencies had paid the tax on the related profits.

HMRC agreed that condition B was met for £129,513 of the excess but did not accept that condition A was met at all.

Following a review, Harbron Recruit appealed to the first tier tribunal (FTT).

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