The First-tier Tribunal has confirmed that a contractor who suspects there may be tax consequences under CIS, and does nothing to check, has not taken reasonable care. Awareness plus inaction is enough to lose the protection of Regulation 9.
George Star Builders Limited v HMRC [2026] UKFTT 800 (TC) was decided on 28 May 2026. The company was the successor to a liquidated construction business. Its sole director, George Jarda, had worked in UK construction since 2007.
The facts were stark. From around 2017, Jarda asked customers to hand over cheques with the payee section left blank. He cashed them at a money service bureau and used the funds to pay subcontractors in cash. His accountant and bookkeeper were never told. When the company registered as a CIS contractor in 2020, it filed nil monthly returns. Substantial subcontractor payments were being made throughout.
HMRC opened a Code of Practice 9 fraud investigation in February 2021 and later issued determinations for the under-deducted CIS. The company asked HMRC to make a direction under Regulation 9, which would have wiped out the liability. HMRC refused. The company appealed.
A Regulation 9 direction is only available where the contractor took reasonable care to comply with the legislation. That was the single issue before the Tribunal.
The company’s argument was that Jarda did not understand CIS, that the rules are obscure, and that there was an information gap. He did not know he had to tell his advisers about the payments. His advisers knew about CIS but did not know to ask. On this account, nobody was at fault.
The Tribunal rejected it.
The Tribunal did not find that Jarda knew about the company’s CIS obligations. It did not need to. It found that a builder of almost twenty years’ experience knew that paying subcontractors cash in hand carried potential tax consequences. That awareness was enough.
The principle is set out plainly in the judgment. A taxpayer who is aware they have taken steps likely to give rise to tax implications cannot normally show reasonable care unless they positively followed up on that awareness. Where you make assumptions about how tax applies, you have to take some steps to confirm them. That need not always mean professional advice. It might mean checking HMRC guidance or asking a knowledgeable member of staff. But where competent advisers are sitting in the building and you simply do not consult them, reasonable care is not made out.
The Tribunal also rejected the argument that Jarda’s personal inexperience set a lower bar. The standard applies to the company, and the company had retained suitable advisers. Having advice available and not using it counted against the company, not for it.
The appeal was dismissed.
The reasonable care standard is no longer confined to a contractor’s own deductions. From 6 April 2026, principal contractors can be held jointly liable for CIS fraud committed elsewhere in their supply chain where they knew or should have known about it. The duty to enquire that George Star Builders describes is exactly the duty that now sits underneath that wider liability.
Three points carry across directly.
The bar is not knowledge. It is awareness followed by inaction. HMRC did not have to prove the contractor understood the rules. It only had to show he was aware there could be a problem and chose not to look into it. That is a low threshold for HMRC to clear.
Means of checking that go unused become evidence against you. Having advisers, guidance, or a screening process available and not using it is treated as worse than not having it at all. A documented check is the positive evidence of follow-up that the Tribunal said was missing.
Claimed ignorance carries no weight. Self-characterisation as a small or unsophisticated operator is assessed proportionately but does not excuse a complete absence of enquiry.
“The contractors who lose these cases are rarely the ones who never suspected anything. They are the ones who suspected something and decided not to find out.”
Reasonable care is not a state of mind. It is a record of the steps you took. If you cannot show the steps, you cannot show the care.
This briefing is based on the full judgment in George Star Builders Limited v HMRC [2026] UKFTT 800 (TC). It is general commentary, not advice on any specific situation. The Regulation 13 determinations in this case have been stood over and remain to be decided.
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