CIS Tax - Here's an interesting one for you..

tl;dr Paid Gross instead of Net, is my client obligated to pay back the tax to contractor?
Anyone have much experience with this scenario?
So my client is CIS registered, net status.
He sent out a bill to a contractor, they asked for his UTR & CRN, which he diligently gave.
After a month my client is impatient with not being paid (typical big boys don't pay the little guy) and spends a week phoning the office.
Eventually the money is paid, but GROSS.
This was on 03/02/17. Today (21/02/17) the contractor has phoned and asked for a refund of the tax, and will then provide a CIS certificate.
I pointed out to my client that a CIS certificate should have been sent a maximum of 14 days after the end of the tax month, which would have been either Sunday or Monday (19th & 20th respectively).
My client had such a bother getting the money from the contractor, if he can avoid paying them back the tax he will.
Is he legally obligated to pay back the tax amount (£1028.80) as it's the contractor's cock up?
The client will simply treat the invoice as gross and move on with life, as we all need to!


  • Bertie
    Bertie Registered Posts: 376
    CIS is a pain in the rear.

    Little return for too much nonsense.

    Contractors fault, do they not check the status of the subbies?

    It is what it is - not the end of the world.

    If anything the contractor is legally obligated to make up the short-fall himself due to his inadequately run empire.

    These things happen.

    It is CIS after all.
  • TreadStone
    TreadStone AAT Licensed Accountant Posts: 280 ? ? ?
    edited February 2017
    Forgetting the legalities for a minute, what about morally ?

    Yes, maybe the paperwork and timing isn't as required but you both know it's an error and that he should pay over the difference.

    What if it was in reverse, your client would want it repaid would he not ?

    Also, it may affect potential future work for this contractor if he's arsy about it.
  • stevo5678
    stevo5678 Registered Posts: 325
    edited February 2017
    I wouldn't be too worried if he didnt pay the tax back as it's the contractors job to verify your client and use the correct tax treatment . Ultimately the tax man will get his tax as it's just a timing thing .

    However if the contractor is kicking off for the sake of the relationship maybe it's worth giving the tax back .
  • TheAccountant
    TheAccountant Registered Posts: 2
    I believe this contractor was a 'one off' i.e not likely to need help again.
    I'll feedback that maybe paying it back is a good idea, for future business, but I'm not sure what he will do in the end!
    Thanks for the advice all!
  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    If an e'ee is overpaid they will be expected to pay back the overpaid net salary.

    If a customer overpays, that customer will also expect a repayment.

    I think the same will apply in this situation- the last thing your client needs is debt management from the agency chasing them and this ending up in the small claims court. However this is more of a legal issue so really you shouldn't be advising on this- especially if you are not confident your answer is correct.
  • payrollpro
    payrollpro Registered, FMAAT Posts: 427 Dedicated contributor ? ? ?
    I don't think the customer/overpayment issue is relevant, I'm afraid. THe law is very specific, contractor verifies or withholds 30%, otherwise holds back whatever HMRC tells them to. They failed to comply with the law and the client is fully entitled to retain the moneys. The fact is the client will process their final accounts and offset any CIS suffered against the liability. If there is nothing suffered, or it is less than it should be, its not his problem. I'd go with the comment about future business, if there isnt any then thats irrelevant. The contractor could try billing for the CIS they ought to have taken and then pursuing that through the county court, but that means raising a flag to tell HMRC he doesnt know what he's doing, never going to happen.
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