I have just picked up a client to do the bookkeeping for, he is a painter & decorator who issues invoices to his clients and when they are paid they have the 20% CIS tax deducted from the labour only. He has received most of of his CIS payment and deduction statements but not all of them, am I correct in thinking that he can only claim the tax back based upon the statements received and not for the ones that he has not and therefore I should advise him to go back to his cleints and get the missing statements.
I would claim the full amount of deductions and indicate on the self assessment that an estimate has been used with an explanation in the 'white space'.
You'll need to complete a Self Assessment tax return at the end of the year. HMRC will work out your tax and NICs bill and set any deductions you've had made against it.
One reading of the above is that HMRC will cross-check and amend your SA if it does not tally with their Contractor information. The estimate will, hopefully encourage them to do so.
Of course, the best solution is to get the statements from the contractor.
If the amount you put in doesn't match what they have they tend to write to you and ask you to send in copies of the deduction statements to prove your figure, all of which holds up the clients rebate. Ticking the estimate box in my experience just pushes you to the top of the enquiry pile!
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Yes, if there's no joy from the Contractor, better still to request HMRC for their deduction figure before submission of the SA. My solution is more suited to a last resort situation or one where the Contractor is known to be awkward.
In the event an aspect enquiry would be thwarted by the (possibly un-read) information already given in the blank space.
Providing the rest of the accounts are sound, HMRC would waste more of their own time than ours.
he can only claim the tax back based upon the statements received
and the quote from HMRC guidance. I would certainly demand all the tax he had paid whether or not I had all the statements; after all it doesn't say "we will deduct all the tax you've entered on your self assessment". That would actually be doing very little at all, on their part.
I have had a lot of experience in this matter over the last year or so.
Firstly, every contractor has a legal requirement to produce and issue a deduction statement to the sub-contractor; this is the same a payslip if you are employed. Failure to comply can result in penalties so always go back to the contractor and demand them or get your accountant to do it.
Secondly, you only need to be able to prove the deductions if you have not got the statements and this can be done via your sales invoices and the payments made by the contractor; invoice value less payment amount should equal 20% deduction.
Thirdly, if a subby has income of £30k and loses £6k in CIS, both these figures should be reported on the SA; the onus is on the subby to be able to present an accurate set of accounts.
Finally, yes, HMRC do have all the figures and I have successfully managed to obtain them for various clients on various occasions; you cannot go through the agent line but need to write (and then grovel) to HMRC in Newry.
The main point though is that of re-iterating point one above - if contractors do not produce or refuse to produce the statements, then report them to HMRC - ultimately, it makes our job a lot easier if we have this information. More commonly, deductions statements are printed at the end of each month when the contractor does their CIS Return so there is no excuse.
A bit of an aside but maybe useful info. HMRC are putting a lot more energy into cross-checking contractor / contractee returns to ensure they both match. Apparently a new team has been set up in Newcastle to do this.
Mark, it might be worth getting you're client to mention it to the Contractor. It seems reasonable that closer monitoring / cross-checking will lead to an increase in non-compliance visits and perhaps penalties.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
