CIS not deducted - long shot here, I know

MonsoonMonsoon Font Of All KnowledgePosts: 4,071FMAAT, AAT Licensed Accountant
Client is a CIS contractor.

He accidently overpaid one of his subbies (co-incidentally the same amount as the 20% deduction) and didn't make any deductions. Obviously, he should have. It was an oversight.

The subbie has sent in his tax return, has declared the gross income and paid the tax due, but won't refund the overpayment.

My client wants to do the right thing, but clearly doesn't want to be out of pocket (as he will be effectively paying the 20% twice, once to the subbie and once to HMRC).

I know this is a long shot but given that there is no tax lost to HMRC, can we come clean and ask them to be reasonable about this?

I know. I know they will say pay the 20% and claim it back off the subbie, but that's not going to happen. Any bright ideas?

Comments

  • JodieRJodieR Experienced Mentor Posts: 1,002Registered
    If it's a one-off and you're sure that the subbie has paid the tax due then personally I'd not say anything. If you do get a CIS investigation and everything else is in order then I think it would be pedantic of them to cause a fuss over that.
  • PGMPGM Font Of All Knowledge Posts: 1,954Registered
    I have the number for the CIS helpline, you know how helpfull they are :D

    Could you record it as an accidental gross payment? And keep records to show the HMRC that the subcontractor has refused to refund the money.

    Might help if you can get a copy of their return, backed up with evidence of when the amount was paid over to the HMRC.
  • MonsoonMonsoon Font Of All Knowledge Posts: 4,071FMAAT, AAT Licensed Accountant
    JodieR wrote: »
    If it's a one-off and you're sure that the subbie has paid the tax due then personally I'd not say anything. If you do get a CIS investigation and everything else is in order then I think it would be pedantic of them to cause a fuss over that.
    I wish.
    The tricky thing is, we are going to have to send in amendments for a number of periods, so we can't leave it off as we know about it and it would be wrong and odd to correct other things but not this.
  • BluewednesdayBluewednesday Font Of All Knowledge Posts: 1,624Registered
    I had this happen with a client, we found out at year end that they had paid several contractors gross. We 'fessed up and he was penalised and charged the tax, we argued that the tax had been paid by the Subbies. They did look at it and all the subbies that were up to date with their tax returns we had the tax cancelled although the penalty stuck.

    You may have to appeal to get it but you should be able to get it - the worst would be a penalty but our client had several omissions not just one so you may get off better than we did!!!
  • MonsoonMonsoon Font Of All Knowledge Posts: 4,071FMAAT, AAT Licensed Accountant
    Thanks BW, that's very helpful.
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