Compliance check CIS - payments not taxed

Compliance check CIS - payments not taxed

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My client has recently had a compliance check on CIS returns. He has been found to have omitted a few payments from his return, and tax was not deducted. The compliace officer is looking to my client for the tax that should have been due. Can he recover this tax liability from the subcontractors. How is this liabilty now accounted for in the accounts?

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JPW
By jpwattam
08th Nov 2010 20:45

Try it

I think you're quite entitled to claim the money from the subcontractors, otherwise HMRC has a clean profit at your expense.  We've made a few mistakes with CIS (normally deduct tax when we shouldn't!) and the inspector has advised us that we are not liable to refund the incorrect deduction if the invoice is not clear.

Is the invoice clear in this case that CIS tax should not be deducted?  Although possibly not enshrined in law, I would say that any supplier with a CIS registration should spell out on each and every invoice how they expect it to be treated under CIS, as otherwise they risk over-deduction.  In your case their lack of clarity has resulted in under-deduction.  If you are still using the supplier, you can simply make a deduction from the next remittance.

In fact I think HMRC might expect you to get the money back from subcontractors, and might even give you suitable written documentation that you can show to the subcontractors as evidence.

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