I have a client (company A) who has been issued an invoice (from company B) for £3,000 relating to undeducted CIS in the 2013/2014 Tax Year. The invoice has been generated due to a HMRC enquiry into the tax affairs of company B which revealed that they had underpaid CIS to the value of £10,000. Company B is seeking to obtain this money by raising invoices to all the suppliers affected.
My client is not registered for the Gross payment scheme however was paid Gross for their invoices. This assumes that company B did not verify their contractors at this time and no CIS statements were received.
This overpayment by company B was not picked up by my client’s accountant (previous) when preparing their year-end accounts.
Both companies are limited and operate PAYE and CIS schemes.
Is my client legally obligated to pay this invoice?