Penalties for Failure to Verify Sub-contractor?

New CIS Contractor Registration, 20% Deducted Prior to Verification

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Does anyone please have the inside track on the potential penalties in this situation: new s/e CIS contractor, registration effective from December who deducted 20% from his subbies in December & January, but didn't verify them until February. (The subbies are now both verified @20%).

Aside from late filing penalties, what potential penalties are there for paying a sub-contractor who is unverified? 

Replies (9)

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By Adman W
19th Feb 2024 16:40

My Understanding was that the penalty was that you were liable for the tax you had failed to deduct.

Having deducted 20% and verified as such, he would be ok.
If he had verified them at 30% he would owe the shortfall and good luck getting that back off the subby if he's no longer working for you!

I await with interest to see if anyone is aware of further penalties.

Thanks (2)
By SXGuy
19th Feb 2024 16:47

None if they verified at 20% as far as I can see

Thanks (1)
By richard thomas
19th Feb 2024 16:50

The penalty is charged under s 98 TMA (see Table 2 entry for regs under s 69(1) FA 2004).

The initial penalty cannot be determined under s 100 TMA, but must, like a P11D penalty, be proceeded for before the Tribunal (s 100C).

I bet the number of times penalties have been proceeded for is under 1.

That is for failing to verify before payment. As Adman W says, if there was underdeduction you must pay the tax you should have deducted if demanded, but that is not a penalty, any more than a reg 80 determination is.

Thanks (5)
By I'msorryIhaven'taclue
19th Feb 2024 17:24

Thank you all, the penalties look promising.

Moneysoft won't allow a 20% verification to be backdated, so it looks as though he's stuck with 30% deductions until the point in February when 20% verification was made.

Thanks (1)
Replying to I'msorryIhaven'taclue:
By doubletrouble
19th Feb 2024 17:56

You should be able to put in the verification code manually and adjust the status to 20%

Thanks (2)
Replying to doubletrouble:
Johny Fartpants Picture
By johnny fartpants
19th Feb 2024 19:27

Yes you can. "CIS", "Subcontractor details" and "Enter verification details manually" lets you specify the tax status but only for periods on or after the date of verification.

If you want to change the tax rate for earlier periods, which the thread suggests maybe the best method, you'll need to also go to "CIS", "Payment details" and double click on the "Tax Treatment" column for the necessary amendment.

Thanks (1)
Replying to johnny fartpants:
By doubletrouble
19th Feb 2024 19:45

Which is exactly what I mean, you change the status to 20% but Moneysoft will give a warning that no verification number is present before you submit, so you input it manually.

Thanks (1)
Replying to I'msorryIhaven'taclue:
By SXGuy
20th Feb 2024 08:42

Certainly can. Double click the contractor status and copy paste the verification code and change the status for the previous month.

Thanks (1)
By Ioana B.
22nd Feb 2024 11:08

I am not aware of any penalties connected to the late verification .

Just add their past payments in the 11th tax month and submit the EPS for allocation (if any cis suffered).

As long as it is the same tax year 23-24 and does not create discrepancies in the company’s financial year ,that wouldn’t be a problem.

However ,if one of the subbies is under 30% status and deductions can’t be recovered ,contractor will take the hit and dig his own pockets.

Thanks (0)