Tax & Accounting News

Subcontractors' Compliance Test Conditions Relaxed

30/05/2008

Tax chiefs have relaxed a condition in the annual Construction Industry Scheme (CIS) compliance test that has been causing problems for many subcontractors.

From 3 June 2008, HM Revenue & Customs (HMRC) will no longer treat the late payment or non-payment of a tax liability of less than £100 as a compliance failure for the purposes of the test. Some businesses have been facing the loss of gross payment registration status over the slightly late payment of very minimal liabilities.

Meanwhile, an HMRC investigation into why many CIS returns have been arriving late at the CIS Processing Office has found that many had insufficient postage or none at all.

The investigation was prompted by complaints from contractors that they were receiving late filing penalties, despite having posted their returns well before the due date. A sample of around 300 late returns revealed that:

• Some had no postage on the envelope.
  
• Some did not have enough postage for the size of envelope, which can lead to delays due to envelopes being surcharged and delivered separately. An A4 envelope requires at least 48p postage, but it appears that many contractors and their staff have been using a standard 34p first class stamp.
  
• Many returns had been posted too late to arrive by the due date.

Barry Lewis, senior partner at Harris Lipman, said: “Contractors need to make sure that returns are posted well before the due date, to make sure that they arrive in good time.

“Their employees also need to be aware that postage rates now depend on both the size and weight of the package. It is also sensible to make sure that mail that must meet a deadline is clearly identified as urgent and given the correct first class postage.”

He added: “Although HMRC’s decision to no longer treat a minimal tax liability as a compliance failure for the purposes of the test is very welcome, it is deeply regrettable that it has taken protests from the industry, large numbers of appeals to HMRC’s General Commissioners and threats to the continuing existence of businesses to bring about a commonsense solution that should have been embodied in the legislation in the first place, had it been properly thought through.

“This is really only a partial answer to the problems, and we would urge HMRC also to relax the conditions whereby very slight delays in submitting routine returns also constitute compliance failures at present.”

Please contact us for assistance in relation to any CIS issues.

 

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