Harris Lipman News

Harris Lipman Subcontractors' annual compliance review briefing

22/01/2008

Subcontractors operating within the Construction Industry Scheme (CIS) are warned that the taxman is taking a zero tolerance approach on whether they can continue to be paid without tax deductions by contractors.

Two Harris Lipman client companies operating within CIS were told by HM Revenue & Customs (HMRC) that their gross payment status would be withdrawn following an annual compliance review.

The compliance reviews, launched in October last year, will see all subcontractors with gross payment status reviewed each year. Companies are chosen at random for the checks, which include a review of all tax returns and payment of tax and national insurance, along with submission of any material requested by HMRC.

Minor compliance failures, including three payments of CIS/PAYE deductions arriving up to 14 days late, will be ignored in the review. Click here for further details.

The two Harris Lipman clients were told that following their review, HMRC could not allow them to continue to be paid gross and that it would also be writing to their contractors to tell them that they must be paid with deductions of 20%. The companies cannot reapply for gross payment status for at least 12 months.

The companies had breached the PAYE late payment rule, although 'late' in these cases was defined as one day, two instances of two days, and six days. The companies are now appealing against the HMRC decision.

Senior partner Barry Lewis said: "This is a far from serious breach. However, it is obvious from HMRC's attitude that they are taking a zero tolerance stance.

"This is an extremely worrying and dangerous position for companies, given the costs of potential appeals and the time and effort involved. There isalso the added complexity of companies for whom you undertake work knowing that you are not compliant, and the possible loss of credibility with customers.

"To avoid this problem, subcontractors with gross payment status must make sure that all PAYE, personal tax and corporation tax payments are made on time and all returns, including any P35 and CIS monthly returns, are submitted by their due dates."

 

Print page