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CIS deductions on accommodation charges paid direct by contractor

CIS on accommodation

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I have a situation where a client is being assessed for CIS tax not deducted on accommodation charges paid for subcontractors, albeit that the client contractor makes the arrangements and has paid them direct.  As this has arisen out of a PAYE inspection, it would be a contract settlement and there is no recourse for the contractor to subsequently recover the tax as it is not available to the subcontractors.  Those who I have spoken to at HMRC take my point that this is undue enrichment on their part but are apparently powerless to give any form of concession.  We have lodged claims for reg'n 9(5) employer relief and had them rejected.  I spoke with the officer concerned and was advised to appeal as HMRC is undertaking a review in this area to give their officers further guidance.  Apparently there are a lot of these cases at the moment, per HMRC!!  Has anyone else come across this situation and have they been able to convince HMRC to "back off".

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By lionofludesch
21st Jun 2016 12:53

I've heard of this though never come across it in practice. I don't agree that, where the contract is between contractor and hotel, this is correct.

It seems a nonsense to me. Suppose the 66 year old subcontractor wants £500 and the contractor pays £100 for an overnight stay.

Presumably, HMRC want tax of £120, but the subcontractor will only get £380. His accounts will include £600 in sales and £100 in expenses, £500 profit, tax £100, repay £20. Obviously the subcontractor will have to guess that the difference between the £500 he asked for and the £600 on his tax certificate is the accommodation.

But - wait - what about the VAT ? What goes on his invoice ? "£500 + whatever you paid for my digs"? Plus VAT at 20% of £500 + something.

It's a nonsense. Ask them how they think you should cope with it and then point out the practical difficulties.

What's all this for ? Who gains ? Nobody.

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Replying to lionofludesch:
By carol.w
21st Jun 2016 14:14

You are correct on all counts. Their reaction to my questioning the sense in it all is that "its what the CIS manual says". Very frustrating and for the time being I have a very angry and depressed client.

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Replying to carol.w:
By lionofludesch
21st Jun 2016 14:43

The CIS manual isn't the law.

Ask them for their authority in the legislation.

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By lionofludesch
21st Jun 2016 14:52

This is their own advice from their website .....

"To make a deduction from a subcontractor’s payment, start with the total (gross) amount of the subcontractor’s invoice.

Take away any of the following the subcontractor has charged for:

equipment which is now unusable (‘consumable stores’)
fuel used, except for travelling
equipment hired for this job (‘plant hire’)
manufacturing or prefabricating materials

Finally, deduct the CIS percentage rate (as given to you by HMRC) from the amount left. You’ll be left with the net amount you need to pay the subcontractor."

Where does it say anything about accommodation paid by the contractor ?

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By lionofludesch
21st Jun 2016 16:41

Oh - and say you want it reviewing by a more senior officer.

And then take it to the Dispute Resolution team.

Incidentally, I couldn't find the bit in the CIS Manual. Did they say where it is or were they making it up ? (Which is not unknown.)

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By philfromleeds
20th Jun 2018 16:29

If a construction worker is self-employed they should not be given to use a van unless they pay a rental charge plus vat for the van. A self-employed construction worker pays for his own lodging. if a payment is made to him for lodging, it does not matter if it is taxed or not taxed. The self-employed CIS worker must keep proof of his lodging expense. If he sleeps in a van and has had CIS tax deducted from the payment for accomodation, then he is basically paying tax on all his earnings. if cis tax is not deducted from Lodgeing allowance and he sleeps in the Van, then for him to try to avoid his lodging allowance from being treated as income he will have to deal with his own tax affairs and not use an agent. To hide it is tax fraud .

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