18 Apr 2013

ICM lose appeal

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The judgment for Island Contract Management (“ICM”) v HMRC was released last week and to no-one’s great surprise, ICM were unsuccessful in their appeal and it was confirmed that they were liable to pay HMRC a rather large £43m in liabilities!!

ICM operate offshore and offer the Construction Industry subcontractors they engage the chance to be “paid gross” even when they would normally be paid having 20% or 30% CIS deductions made. This is essentially because ICM are based offshore and in their eyes not supposedly required to operate the CIS scheme.

It has been accepted by most in the industry that the way in which they operate was fundamentally flawed and could not be substantiated if challenged by HMRC. Like all businesses that operate incorrectly, it is only a matter of time before HMRC catch up with them, unfortunately in most cases, it can take several years of arguing with HMRC before a case is even listed at the tribunals for a hearing let alone then waiting up to two years for the actual hearing. It is therefore refreshing to see HMRC finally starting to bite with some of the companies that people have been wondering how and why they have been getting away with it for so long.

The court made various comments about ICM being unable to legitimately support their business model and how it would genuinely work with the current legislation. Someone running a business should be able to talk about their business openly and clearly explain how it operates, this was not however the case here.

As we have always said, if the individual lives in the UK and works in the UK, they are subject to UK taxation!