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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
, see all updates

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.