Senior Consultant Chartergate Legal Services
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HMRC rolls out new measures to tackle CIS abuse

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HMRC introduced further changes on 6 April to tackle Construction Industry Scheme (CIS) abuse. Herminder Sandhu finds out what the rules mean for contractors and sub-contractors.

9th Apr 2021
Senior Consultant Chartergate Legal Services
Columnist
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Some of our more ‘experienced’ readers will be aware that the first attempt at addressing what the Inland Revenue considered fraudulent practices in the construction sector came way back in 1972 with the introduction of the Construction Industry Tax Deduction Scheme.

The evolution continued in 1999 when a second version of the scheme was put in place until the latest and, arguably, most successful version was brought into play in 2007.

HMRC continues to give the sector close attention and the Construction Industry Scheme (CIS) has undergone more change with the introduction of measures on 6 April 2021 aimed at tackling abuse as reported in our previous update regarding the consultation and proposals.  

On the face of it the changes may not seem earth shattering but they provide further evidence, if it was needed, of the track HMRC continue on to address perceived problems in the sector.

As a quick recap, some sub-contractor companies may be entitled to set-off any CIS deductions they may have suffered during the tax year against their liabilities as an employer.

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Replies (24)

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RLI
By lionofludesch
09th Apr 2021 14:50

One of my major gripes with the CIS scheme is that HMRC are not open about the tax deductions they hold on the taxpayer's behalf. It's like the taxpayer has a bank account at HMRC but can't have a statement.

Consequently, if a rogue contractor deducts tax but doesn't pay it over to HMRC, it could be a year or more before the fraud is discovered.

This information should be available in real time to taxpayers and their agents via the Government Gateway.

HMRC have set up a system that they're not willing to police themselves.

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Replying to lionofludesch:
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By Paul Crowley
09th Apr 2021 18:17

'One of my major gripes with the CIS scheme is that HMRC are not open about the tax deductions they hold on the taxpayer's behalf. It's like the taxpayer has a bank account at HMRC but can't have a statement.'

So much time saved if added automatically to agent portal and client GG

That really cannot be difficult for an organisation proposing quarterly reports of up to 20 per person per year
VAT, Rent, FHL Trade

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Replying to Paul Crowley:
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By DaveyJonesLocker
09th Apr 2021 21:46

It should be part of the API whereby we get employment and pension income

Thanks (5)
Replying to lionofludesch:
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By johnjenkins
12th Apr 2021 09:39

As you quite rightly say we should be able to see what HMRC have. The other really stupid anomaly is that Limited Companies can offset CIS against CIS deducted from subbies, yet non limited companies can't.

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Replying to lionofludesch:
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By Jdopus
13th Apr 2021 13:02

Absolutely. I have had constant problems over the years with my clients being defrauded by people underpaying them, telling them they're reporting CIS then never filing the report with HMRC. HMRC's attitude in such cases seems to be callous disregard for the honest taxpayer. I have never understood why we can't get this information to protect our clients.

The cynic in me has always believed that the reason HMRC do not make this information available is that subbies regularly lose CIS documents and underclaim their full entitlement. If HMRC were to act honestly they would probably lose some of the unclaimed money that subbies are legally entitled to.

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Replying to Jdopus:
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By Paul Crowley
13th Apr 2021 13:04

This happens regularly
HMRC never deal with the crooks

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Replying to lionofludesch:
Morph
By kevinringer
19th Apr 2021 13:19

In the good old days of Working Together I regularly requested the CIS credits appear on the PTA because subbies would check (the incentive being they have to pay the tax again) for the reasons Lion has given. But HMRC did nothing. Pre 2007 almost all CIS returns were manual, yet in those days our local tax office (remember them?) would fax us a list of captured vouchers so we could reconcile our records with HMRC before submitting the Tax Return. If HMRC could do that when the records were manual, surely now they're digital it should be a breeze for the most digitally advanced tax authority in the world.

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Replying to kevinringer:
RLI
By lionofludesch
19th Apr 2021 13:32

kevinringer wrote:
If HMRC could do that when the records were manual, surely now they're digital it should be a breeze for the most digitally advanced tax authority in the world.

If only we had a digitally advanced tax authority in the UK.....

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Replying to lionofludesch:
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By johnjenkins
19th Apr 2021 16:24

What MTD with quarterly updates for those earning under £85K?????????????????
That's really advanced.

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Replying to johnjenkins:
RLI
By lionofludesch
19th Apr 2021 16:34

johnjenkins wrote:

What MTD with quarterly updates for those earning under £85K?????????????????
That's really advanced.

Not really.

HMRC require the taxpayer to be digitally advanced.

It doesn't mean HMRC are.

Clearly, as they can't even provide a real-time statement of money they hold on behalf of a CIS subcontractor, they are far from it.

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Replying to lionofludesch:
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By johnjenkins
20th Apr 2021 09:23

I'm not so sure that being digitally advanced, without a choice, is of benefit to anyone. You only have to look at all the digital scams going around. Gone are the days of the Nigerian diplomat trying to get a couple of billion into your bank account with a badly worded letter.

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By Paul Crowley
09th Apr 2021 18:12

HMRC now has the power to amend and restrict the CIS deduction figure claimed on RTI via the Employment Payment Summary (EPS) to an amount which matches any evidence either held or provided to HMRC.

That has been the case for years
No change

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David Ross
By davidross
12th Apr 2021 09:59

I would not recommend a 'dilatory approach'

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By CORSALOVER2
12th Apr 2021 10:06

It would be really helpful if HMRC could make it easier for surplus CIS/RTI tax deductions to be offset against the contractor's Corporation Tax liabilities. It seems to take months and months because PAYE/CIS is one department and Corporation tax another. Last year I had a ridiculous case of a client company being owed £8000 in CIS overpayment having a bailiff banging on the front door for £3000 Corporation Tax........

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Replying to CORSALOVER2:
By Nick Graves
12th Apr 2021 12:41

CORSALOVER2 wrote:

It would be really helpful if HMRC could make it easier for surplus CIS/RTI tax deductions to be offset against the contractor's Corporation Tax liabilities. It seems to take months and months because PAYE/CIS is one department and Corporation tax another. Last year I had a ridiculous case of a client company being owed £8000 in CIS overpayment having a bailiff banging on the front door for £3000 Corporation Tax........

Indeed - it seems the 'abuse' usually cuts the other way.

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By Donald MacKenzie
12th Apr 2021 10:11

You did NOT mean "dilatory" !

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By North East Accountant
12th Apr 2021 12:23

It goes to show how inept HMRC is that they started trying to tackle fraudulent practice in the construction sector in 1972 and they still haven't cracked it.

Never mind the personal construction market where HMRC just don't tackle it at all......and it's endemic.

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By CJaneH
12th Apr 2021 12:53

I am more concerned about the subbies using unregulated accountants. I have just had new client who previous accountant prepared submission to HMRC using only Sales & Purchase invoices , bank statements not supplied nor details of Pub Liab Ins & Van Insurance. No accounts supplied to client or a copy of tax return for approval. Tax refund paid to accountant and balance transferred to client.

Accountant apparently traded using Ltd Co, Ltd Co name on payment into subbies bank, but said Ltd Company Dormant since incorporation in 2001!

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By Ammie
12th Apr 2021 13:15

No problem with changes.

But trying to untangle discrepancies arising from HMRC amendments would add more excruciating work trying to reconcile payments, coupled with endless hours of unfruitful telephone calls to HMRC staff reading from the same screen as me and promising to escalate the query, never to be heard again!

The lack of information from HMRC can be a real problem and it seems that too often it involves money due to the taxpayer!

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Replying to Ammie:
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By Paul Crowley
12th Apr 2021 13:20

HMRC really do not refund Subbies with good grace
The latest version of send all your ID through the post is outrageous
Just looks like an ID scam

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By Ian McTernan CTA
12th Apr 2021 13:18

HMRC rolls out new measures to tackle CIS abuse

When I saw this article's headline I was hoping it was announcing some new measures to stop HMRC abusing CIS.

Alas, no. just more paperwork for everyone and more opportunities for fines and penalties and less chance of any productivity gains for UK Plc.

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RLI
By lionofludesch
12th Apr 2021 13:20

Given the number of times that my opening reply has been thanked, I have clearly touched an open sore here.

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Replying to lionofludesch:
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By Paul Crowley
12th Apr 2021 13:24

Agreed
On a company, if too little refund claimed they just snigger and keep the rest
If too much claimed then they do not just pay the money they hold and point out difference
They pay nothing and demand details of all deductions

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By djames
16th Apr 2021 22:52

Just read this from Agent Update 83:

HMRC will contact the customer to provide evidence of CIS deductions incurred within a 14-day timeframe of HMRC’s initial contact. The customer will have the opportunity to explain to HMRC the circumstances around any unverified claim being made. If HMRC does not hear from a customer or, when asked, the customer does not amend the CIS deduction figure on the Employer Payment Summary within a 14-day timeframe, it will amend the CIS deduction figure claimed to the verifiable figure supported by any evidence held by or provided to HMRC. This could increase employer liabilities to tax and National Insurance. Customers will also be prevented from submitting any further CIS claims for the remainder of that tax year.

I really despair at the one sided relationship that now exists between the HMRC and it's 'customers' under the present elective dictatorship we find ourselves. In what universe have HMRC ever responded to a customer request (other than a straightforward tax code change) within 14 days? More like 104 days is the norm. What if the customer is on holiday for 2 weeks? Why do they keep forgetting to notify agents of the letters they send to their customers? Why can't the customer contact HMRC and ask for a record of it's CIS deductions as held by HMRC, and demand this within 14 days? Why is it equitable for HMRC to hold onto thousands of pounds of company CIS deductions and not refund it unless it is requested by the company? How much is HMRC profiting from the non-payment of legitimate CIS deductions?

I'm not expecting anyone to answer these, I'm just bloody annoyed and had to write it down before I explode!

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