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Replies to Queries - 3 - Paper chase

09 January 2002
Issue: 3839 / Categories:

A client company works in the construction industry. The company had one customer, another company, which went into liquidation in January 2001. During the period in which it traded, December 1998 to May 2000, the customer made only 'round-sum' cheque payments on account.

A client company works in the construction industry. The company had one customer, another company, which went into liquidation in January 2001. During the period in which it traded, December 1998 to May 2000, the customer made only 'round-sum' cheque payments on account.

Only one tax deduction certificate was issued, and this was for the period 6 April 1999 to 30 June 1999. It is impossible to reconcile the certificate to any invoices or payments made. Credit was given for the tax disclosed on the certificate against the company's corporation tax liability for the year to 30 June 1999.

We prepared the company's accounts and corporation tax return for the year to 30 June 2000 and, in the absence of tax deduction certificates, calculated the amount of tax that should have been deducted. We claimed a credit for that amount on the CT 600 and, before sending in the form, telephoned the Inspector to explain the situation.

The customer's company secretary stated that, in his view, the work carried out did not fall within the construction industry scheme. Because of this, the payments had not been subject to deduction of tax. He alleged that my client was aware of this.

The Inspector rejected our claim for the credit on the grounds that the payments were made gross, and will not consider:

* the fact that the work was within the construction industry scheme;

* the issue of a deduction certificate for a period;

* the fact that the customer insisted my client obtain a construction industry certificate before further payment could be made after construction industry scheme changes in 1999.

The London Construction Industry Unit is not taking any action as the customer is in liquidation.

Readers' views on the Inspector's approach and any suggested course of action would be appreciated.

(Query T15,934) — Floored.

Issue: 3839 / Categories:
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