CIS Claw Back by Contractor under investigation ??

CIS Claw Back by Contractor under investigation ??

Didn't find your answer?

Does anyone have the experience of a Contractor failing to deduct CIS, then being investigated by HMRC?

My client (subbie) is not having CIS deducted, and probably should be - the contractor is 'old school'. This is not the first time I have experienced this.

How does any back tax claim from HMRC roll out?

Thanks.

Replies (7)

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By lesley.barnes
29th Sep 2015 09:59

Not sure what you are asking?

"How does any back tax claim from HMRC roll out?" Are you saying that the contractor hasn't deducted the CIS and now wants your client to repay the CIS to him or has the contractor asked for proof that your client has already paid the tax through his tax return? What does your client do because you don't seem certain whether he should come under CIS or not?

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Stepurhan
By stepurhan
29th Sep 2015 10:05

Contractor responsible

The contractor is the one responsible for determining CIS status and deducting tax as appropriate. As long as your client pays the right amount of tax in the end (through self-assessment as opposed to CIS deduction) then HMRC will have no reason to come after them.

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By Gone Sailing
29th Sep 2015 11:55

What happens under investigation?

Thanks both.

The contractor hasn't deducted CIS but probably should have. He is 'old school' and probably blissfully unaware of CIS. He is not alone. My client is a verified CIS subbie and has the usual 20% deducted by other contractors.

So, what happens if the contractor is investigated?

It seems to me that this is not unlike PAYE. As far as I am aware, HMRC are entitled to ask an employer for PAYE/NI which should have been deducted from an employee, even if the employee is long gone.

Does anyone have experience of HMRC clawing CIS back from the contractor?

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By SteveHa
29th Sep 2015 12:17

Ermm,

Surely the sub-contractor is registered for self-assessment, has declared the income from the dodgy contractor, and has not claimed a tax credit for a deduction that wasn't made, and so paid the tax via self-assessment instead of at source.

If so, why are you getting overly concerned about the contractor, unless they are your clients, too?

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By Gone Sailing
29th Sep 2015 12:30

The nail on the head

Quite so.

Absolutely no problem with the SA if nothing else happens.

Yes, the client (me too) is concerned about a sudden claw back.

Not great not being able to reassure with a definitive answer. This is the second client with the same question and a different contractor.

The rules are one thing, but if HMRC take a more practical view in an investigation so much the better. Just wondering if anyone had direct experience.

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By lesley.barnes
29th Sep 2015 12:38

If it helps I had a contractor under investigation

I represented a builder who used sub contractors through an agency. Prior to this he did his own tax returns. He paid the agencies invoices blissfully unaware that he should have verified and deducted 30% from the agency invoices. HMRC pursued the client not the agency for the 30% deductions and fines for not submitting  CIS returns.(The agency were not registered for CIS scheme) HMRC said if he could get the agency to provide proof that they had paid tax based on what they had received from the client they would take this into consideration. It came as no shock that the agency went into liquidation shortly afterwards. The client was liable for the 30% deductions and although they gave him a payment plan over 3 years it nearly bankrupted him.

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By rjoconnor81
29th Sep 2015 12:47

Definitive answer

As long as your client's tax return is correct, and your client has paid the correct tax then HMRC will not, and have no right to do a clawback.  It is the contractors issue and has nothing to do with the subcontractor (as long as he hasn't declared CIS suffered when it wasn't).  

 

(And even if HMRC tried to - which they will not, your subbie would pay it to HMRC and then reclaim from HMRC which is a point less exercise).

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