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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: compliance revenue recording: incorrect returns - CIS deductions suffered

It is an important part of any compliance check to look at the accuracy of employer returns submitted by an employer/contractor.

Note: The ‘return’ is

  • the P35 up to and including 2012-13 and
  • an Employer Payment Summary (EPS) from 6 April 2013.

Whilst checking the accuracy of returns you may identify instances where an employer has submitted a return and there is an incorrect entry claimed for CIS deductions suffered. These cases should be registered on Caseflow.

Where action is taken in accordance with COG909235 and

  • it is established that there is an incorrect claim for CIS deductions suffered or
  • the subcontractor, individual or company does not respond to enquiries

if the claim was on a P35, you will need to

Consider whether penalties are due for the submission of an incorrect return.

If the claim was on an EPS return, you must not amend the ETMP record.   

From 2012-13, compliance revenue can only be scored on P35 overpayments if we can establish a clear risk that

  • a repayment was likely to have been made now or in the future
  • the amount of the ‘overpayment’ has, or would have been, at risk of being attributed against another amount of tax outstanding.

If this criteria is met you should wait for the supplementary/pro forma return to be processed and, dependent upon the recovery method and whether there are other risks, record on Caseflow

  • the additional compliance revenue arising from the CIS deductions suffered amendment (see examples below) and additional interest to the date the charge is amended as ‘P35 obtained’
  • where there are other risks you should use the relevant letter of offer at COG914765 and settle all liabilities (other than the amendment to the CIS deductions suffered) and all penalties by Class 6 contract settlement suspending the penalty where appropriate
  • where there are no other risks you should:

    • use the penalty only letter of offer at COG914765 and settle the penalty arising from the incorrect CIS deductions suffered entry by contract settlement or
    • issue the NPPS2 notice of penalty assessment via NPPS

suspending the penalty where appropriate

  • if all the penalty is to be suspended you can either

    • use the alternative letter of offer in COG914765 or
    • issue a formal assessment via NPPS, together with the NPPS3 notice of penalty suspension
  • if a contract settlement cannot be negotiated then, dependent upon the nature of the risk, follow the guidance at COG914175, COG908070, COG915075, COG915155 and COG915150.

Examples of compliance revenue that can be scored (Word 27KB)