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Kalinga Holdings Ltd v HMRC [2026] UKFTT 368 (TC)
Kalinga Holdings, a property investment company, acquired a large former office building and converted it into 131 residential flats, making payments of approximately £1.45 million to construction contractors over several years without making any CIS deductions. HMRC subsequently assessed under-deductions of £383,337, which Kalinga was liable to pay.
The First-tier Tribunal refused to relieve Kalinga of these significant CIS liabilities, finding that it had not taken “reasonable care” when concluding that CIS did not apply to its large residential conversion project.
Why this matters for real estate investors
The decision is a timely reminder that CIS exposure is not limited to traditional developers. Property investment vehicles, single-project SPVs, and funds undertaking refurbishment or conversion works can all fall within scope.
Several key themes from the judgment are particularly relevant to real estate development:
- Commercial labels carry little weight. Kalinga’s self-characterisation as an “investment company” was given little weight by the Tribunal, which focused instead on what the company actually did—entering into construction contracts, paying subcontractors for construction operations, and undertaking a development-scale conversion project. The reality of the activities, not the intended long-term holding strategy, was determinative.
- HMRC guidance is not a safe harbour. Kalinga argued that it had relied on HMRC’s CIS340 guidance and informal discussions with an accountant who expressly stated that CIS was outside his area of expertise. The Tribunal rejected this as insufficient, emphasising that the project was large, complex, and financially significant, that no specialist CIS advice had been sought, and that there was no evidence of a structured analysis of CIS risk before deciding not to operate deductions.
- Governance failures can surface years later. CIS liabilities often surface years after works are completed, when records are harder to reconstruct and subcontractors may no longer exist—and if uncovered during a due diligence exercise at exit, they can become a major issue, with the potential to derail a share sale.
The full article, complete with practical tips for real estate investors and funds, can be found on our Tax UK Notes blog by clicking here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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