CIS update

HMRC is writing to contractors and asking them to regularly verify the construction industry scheme (CIS) status of their subcontractors.

HMRC’s records show that some contractors have made incorrect CIS tax deductions, so HMRC is reminding contractors that they must:

• verify all new subcontractors before they pay them;
• verify subcontractors they’ve used before if they haven’t included them on a CIS return in the current tax year (or the previous two tax years); and
• make sure they apply the correct CIS deductions.

The contractor can verify subcontractors using HMRC’s online service or using commercial software, but must use the latter if they want to verify more than 50 subcontractors. We can help you make sure you are compliant in this regard.

HMRC may open a compliance check if the contractor does not take any action. If HMRC starts a compliance check and finds errors in a CIS return, it will treat a disclosure made by the contractor as ‘prompted’, which will likely increase the amount of any penalties the contractor may incur.

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