Companies which are registered under the construction industry scheme (CIS) as sub-contractors, and who don’t have gross payment status, will have tax deducted from their invoices by their customers.
This tax can be set against the PAYE and NIC payable by that company, but in many cases the CIS deductions will exceed the PAYE and NIC payable. In this case the company can claim a refund of CIS deductions using the online form. We can do this on behalf of our clients.
It takes HMRC up to 40 working days to process each CIS refund claim, so don’t start chasing for the refund until after 6 weeks have passed.
Two cases concerning CIS penalties should be kept for future reference, as the reasons the judges gave for accepting the appeals were based on HMRC’s flawed procedures, which are likely to apply in other cases.
On 8 June 2016 HMRC wrote to Ground Force Ltd to inform them that their supplier’s CIS status was changing from 8 June from CIS gross payment to net payment status. Ground Force claimed this letter was not received until 6 July 2016, and in the meantime it had made payments of £314,806 to that supplier without deduction of tax. HMRC imposed penalties for non-compliance with CIS regulations, but the FTT agreed that Ground Force had taken reasonable care to action HMRC’s instructions once they the letter was received on 6 July.
ESE Rendering Solutions Ltd received 34 penalties for failing to submit monthly CIS returns from August 2015 to January 2017. The company claimed it hadn’t received those penalties and HMRC couldn’t prove that it had issued any penalties to that company before 16 December 2016. The FTT thus cancelled all the penalties except for the last one.
Written by the Tax Advice Network