Against all my advice and instructions, a client has gone and paid a subcontractor without a UTR and deducted 20%, only telling me now when I asked for the month ending 5th March figures for the CIS Return.
What is the correct way to deal with this please?
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Do you do the verifications, too? If so I'd point out that no verification means 30%, and that's the only way that you can submit to HMRC. Then it's up to him, do you gross up and he has a shortfall, or does he want to falsify the submission, in which case you disengage.
Except no UTR means no ability to make a submission.
Explain to your client that it is his duty to make sure that subcontractors have been verified before they are paid and that failure to operate CIS correctly can result in your client being penalised by HMRC. The subcontractor needs to register for SA and CIS ASAP, provide details to your client so that verification can be carried out.
Then he's an unmatched subby, 30%, and the choices are either gross up and your client will have to stand the shortfall, or recover the extra 10% from the subby.
Does the subbie not have a UTR or has the client been remiss in obtaining it and passing it on to you. If the former, what is it that makes them such a pleasure to work with?
No UTR ?
If you tell HMRC that and ask if they know it, he'll soon have one.
Your client is playing a very dangerous game. Make sure he knows that.
I don't really understand contractors who feel obliged to pay unverified subcontractors. Don't pay them - they'll soon come up with the information you need !!
Failing an early remedy I would treat him as a casual employee, grossed back up for tax and nic under paye regs.
He must be able to supply a NI number.
I had a CIS contractor client (with whom I disengaged last week - my No 1 post Jan resolution) who kept paying unverified temp subbies with no UTR with the 20% deduction. Of course by the time I found out, they had disappeared.
I was regularly told (in writing) to exclude the relevant toe-rags from the return and treat the payment as if to a casual self-employed worker.
My advice to you though, would be to tell your client that they have to treat the 20% net as a 30% net. The extra CIS deduction should hopefully make them verify next time it happens.