CIS Help needed!

System

I have taken on a client (Ltd co.) who has not verified any of his subcontractors at all.

He has used about 10 since incorporation in January 07 and has just paid them all gross, saying that he 'trusts' them when they say this is OK.

No CIS returns have been made yet this year and he has just had a reminder from HMRC.

I am not sure whether to just submit returns for each month from April, showing what has actually been paid to each subcontractor or to wait for him to verify them to see what the situation is regarding their tax status. This could take another 6 months on current form.

Can anyone make any suggestions please? I'm sure this is probably common but he's the first I've had that's so behind (yes, I know, I'm lucky!)

:?

System

Re:CIS Help needed!

Nightmare!
You need to explain to your client that if he gets investigated that he'll be liable to pay the tax on the grossed up value of the invoices, plus inevitable penalties and interest. And chances are most of them should have had CIS deducted!

Regarding the payments made in 2006/07, does he have any vouchers? If he does then I would try to get copies of the subbie's CIS cards and issue vouchers to them, then use these details to complete the annual CIS return. Say a subbie was paid £100 in Feb, I would issue the voucher for £18 and get your client to pay £18 to HMRC, then deduct this from the next payment made to the subbbie.
This of course will only work if your client is planning on using the subbie again.
Although not strictly correct, I would risk ignoring any small amounts paid to subbies and explain to the client that they may be liable for the CIS on these if they're investigated. I just don't see that it's worth the hassle for tiny amounts.
If you don't have vouchers then I don't know what to suggest short of contacting HMRC and asking what to do.


There is a little clause somewhere in the CIS guidance that states that if a subbie has paid tax on the money received that the contractor will not be liable for it, but I don't know how easy it would be to use this argument in the event of an enquiry.

For payments made since April, I would recomend getting all subbies concerned verified ASAP and get the monthly returns submitted. again, if they've been paid gross when the should have been paid net then the best you can do is pay over the CIS to the revenue and deduct it from a future payment. (I don't think that this is strictly allowed, but at least it shows that you're taking steps to correct the errors and get things sorted out).
Otherwise, to completely cover the client he'll have to pay over CIS on the grossed up value. For example, if he's paid a subbie £100, he'll have to pay an additional £25 to HMRC.

Good luck with it, I've had a few similar cases but none this bad!

Jodie

System

Re:CIS Help needed!

Thanks for the speedy reply, Jodie - you've been a great help.

I could really do without clients like this - thinking about asking him to find someone else if he doesn't sort his act out!

Thanks again.

Emma