Supporting Guidance: employer compliance: guidance by subject: construction industry scheme (CIS): deductions not suffered by the subcontractor
Where the subcontractor is
- uncertificated (up to 05-04-07)
- unmatched (from 06-04-07) or
- registered for payment under deduction (from 06-04-07)
and the contractor has
- paid the subcontractor the gross amount,
- calculated and paid to HMRC the deductions which should have been made from the gross amount paid and
- included those deductions on a CIS return
the caseworker should
- explain to the contractor that he has a legal responsibility to make deductions from that subcontractor, and
send a memo to the subcontractor’s accounting office to make sure that the subcontractor involved will not be given credit for the deductions borne via self-assessment. As the contractor has fulfilled the requirements of
- Regulation 8 of the Income Tax (Subcontractors in the Construction Industry) Regulations 1993 (up to 05-04-07) or
- Regulation 7 of the Income Tax (Construction Industry Scheme) Regulations 2005 (from 06-04-07)
there will not be a recovery.
If following discussion a contractor still proposes to bear a subcontractor’s deductions in respect of future payments, the caseworker should advise the contractor that
- the amounts which are liable to be deducted from future payments should be remitted to the Accounts Office
- deductions borne should not be included on forms CIS300 or pay statements given to net or unmatched subcontractors, and
- the subcontractor will not be entitled to credit for the deductions borne.
On returning to the office the CI Caseworker should
- follow up the advice in writing
- send a copy to the contractors accounting office, and
- retain copies in the review papers.