CIS Pay and Tax Enquiries

I think the whole Construction Industry Scheme is a nightmare laden with traps for the unwary ... but I think it would be wrong to rely on HMRC records, even if they were obtained.

Subbies often fail to keep good records ... but so do contractors, and their submissions to HMRC cannot be guaranteed to be accurate. If you had both sets of records available and they did not match, how do you know which are the correct records? Would you really prepare a tax return based on HMRC records alone?

Most subbies get paid direct to the bank, or get a cheque. Bank statements can always be obtained and all income scrutinised. If you have no records at all then prepare estimated records, mark the tax return accordingly and use the white space for an explanation.

Where a tax return shows the subbie has lower earnings than those recorded by contractors, then HMRC are obviously going to enquire why. If the subbies tax return shows higher earnings than those recorded by the contractors they are more likely to investigate the contractor(s). Why would they enquire against the subbie?

I do sympathise with your predicament, but also think you are trying to cure the 'symptoms', rather than the 'disease'.

The base problem is client records, or lack of them. OK - the first year they are a client I am happy to do the best that I can to sort out the mess, but I don't let them totally off the hook, and I don't accept poor records on an ongoing basis.

You need sufficient records to do your job properly. If you don't have those records can you honestly prepare a tax return and be reasonably confident it is correct? If the records are really bad then I advise my client that I have to mark the return as being based on estimated figures and warn them of the possible enquiry that may be a result of this. It is amazing how often the records are suddenly 'found' after this warning!

You can split the Construction Industry in two. The big boys, who normally keep good records and are up to date and the smaller concern who are less concerned with record keeping, although good at their job.

HMRC have realised that not keeping adequate records is a prime target for PENALTIES. They really aren't interested in helping Accountants do their job. Should they be??????????? Should HMRC make available information which would make our life a lot easier???????? Not if they are looking for penalties they won't.

HMRC created CIS so it is my view they should make available all information regarding tax payers. To me they hold the adequate records that is needed to complete a Tax Return (I realise that this is probably contentious, but CIS is not of tax payers making).

CIS, in its present form will always cause problems because it is artificial. It has now passed its sell by date (although it did what it was supposed to do when first set up).

Back to the posting. The onus is on the tax payer to keep adequate records and it really shouldn't be too difficult for a weekly income and expenditure book to be kept. The most problems stem from a contractor paying a subbie on 5th April and putting it on their 5th May return. Someone then has to check to see what has happened. Of course it would be a lot easier if we had access to that information than all the tooing and throwing to HMRC. Think PENALTIES!!!!!!!!!!!!!!!!

Not wanting to drift too far off subject but how many advisers simply add up the income from the twelve monthly CIS Statements (assuming that they are available) when calculating the Income for the year and how many take account of opening and closing Trade Debtors (when a subbie works "a week in hand")?

As I have posted on similar threads, I have a client who has been trying to get a full refund of 2008/09 CIS for 18 months or so. They have excellent records (I keep them - lol) we have sent HMRC details of bank statements, invoices etc to prove the deduction, but because the contractor has either failed to return; or returned in the wrong period; or returned incorrectly; they will not pay, even when the contractor does bother to issue a certificate

The whole CIS system is a farce at best, and a money making racket for HMRC at worst.

Any system which puts the sub-contractor out of pocket through circumstances over which he has no control is just wrong and needs urgent overhaul (or abolishment).

it's not always the contractor who fails to keep good records!

I have a client who submitted fully up to date returns during 2010-11 - I did them! - but had two £100 penalties.  These were in respect of returns I submitted on time but HMRC then deleted from the system.

However, I submitted these using an external software provider and HMRC had no alternative but to reinstate the returns and wipe the penalties.  Had I been daft enough to use the HMRC software directly I would have been stuffed.

So exactly how often does HMRC delete submitted CIS returns? It's not just in CIS - they muddled up one client's self-assessment returns with another guy of the same surname living hundreds of miles away - so 2 completely different post codes.  But then deleted my guy's 08/09 and 09/10 returns - returns submitted by me - from the system and hit him with two £100 fines.

They had nowhere to run as I had the external software submission date and time stamps from HMRC.  But had I just used the HMRC software........

It would be really interesting to know which software you use for submitting the CIS returns.

Thanks

Moneysoft - its cheap and really easy to use

... I use the BIC and papyrus method and transmit via a regal logistics purveyor facilitated by attaching a small agglutinant leaf.

We have been having exactly the same problems and have been unable to obtain any information.  We also are told it is your clients' responsibility not ours.

At the conclusion of each TEEL enquiry, we write the same paragraph commenting how we would all be better off and costs would be saved if the information were to be provided.  After all, it is not difficult to do.

Mostly, the paragraph is ignored, but we have had a couple of HMRC officers ring and basically comment that we are quite correct and that it is easy to provide the information.  Unfortunately, they have been expressly informed not to provide agents with the information.  How frustrating, time consuming and costly when it could all be avoided!!!!!

Philip

Aside from HMRC issues, most subbies are aware that a CIS deduction certificate is "money" to them and value them accordingly:if they have no other records they will have a wad of these.

However, they frequently try in vain to get these from contractors without success,or if they do get them it later transpires that the contractor has not returned them properly.

Cut-off is another problem, it is common, in my experience, for contractors to delay payment until the 6th April so they can then gamble on not having a compliance visit and take up to a year to return the payment, leaving the subbie the best part of two years to get a refund.