The appellant’s appeal against a personal liability notice in respect of penalties imposed on a company for inaccuracies in its CIS returns was allowed as HMRC was unable to establish that the inaccuracies were deliberate.  
 
The appellant was a director shareholder of a company (S), which was within the construction industry scheme (CIS). In February 2016, HM Revenue and Customs (HMRC) officers undertook a compliance visit at S’s business premises. During the visit, HMRC put it to the appellant and S’s finance director (CS) that S had been making payments to various companies without deducting CIS tax. The appellant and CS freely admitted that this was the case and stated it had been their understanding that the CIS did not apply to payments made to ‘umbrella’ or service companies rather than to subcontractors directly.  
 
HMRC advised S that its gross payment status under