THE GREEDY TAX MAN!
A client deducted tax at 20% from one of his subbies but now HMRC Small Business compliance are stating that it should have been at 30%. My client said he verified the subbie by phone when the subbie was first hired over 3 years ago and states that HMRC confirmed his status at 20%.
Three years on, my client cannot find a record of the verification number and is very worried now that HMRC are demanding the extra 10% tax totalling £10,000 (approx) over the last 3 years; and because incorrect monthly returns were submitted as a result, ‘interest and penalties may apply’ !!!
The other 6 subbies have been hired since before the new CIS scheme commenced on 05/04/97 so verification numbers were not needed, they are all subject to 20% tax deduction.
In my client’s defence my argument is this: the subbie in question has filed his tax return each year, claimed credit for the 20% tax deducted and received a small tax repayment each year. If my client should have deducted 30% instead and paid an extra £10,000 in cis tax, then the subbie would have received an extra £10,000 in tax repayments…..…so HMRC has suffered no loss.
My client has an excellent tax compliance record since he started in business around 10 years ago, so I am prepared to battle it out at a tax tribunal if necessary.
Members’ views or similar experiences would be much appreciated.
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