CIS enquiry

[IanWhite]

I have a client who has just had a CIS enquiry. One issue that came about was an owner driver sub contractor had claimed as part of his material element on his invoice a proportion for plant expenses on a vehicle he owned. I understand this to be wrong , as do the Revenue. However the subcontractor and his accountant have told my client they were cleared to do this by the Revenue.

The outcome however is that the Revenue have now billed my client for the error with interest. Over 5 years or so this has come to over 6k. I have searched the manuals and found that they state the contractor should check the materials for reasonableness.However I cannot find an area that states the contactor will be liable for such an error which for all purposes is the fault of the subcontrator. The subcontrator and his client are refusing to give much help in this issue and it is unlikely my client will recover this amount from them.


Any guideness of this would be much appreciated.

Thanks
Ian

[robbob]

It really is a shame when the tax office get involved in petty (no loss of revenue) stuff like this - presuming that the subcontractor is a legitimate business that is still trading and is up to date with its taxes.

Can you give some further details of exactly wthat the nature of the "subcontractor driving is"

The following is taken from teh CIS the manual about plant hire with driver.

Note: Where a subcontractor has to hire plant in order to carry out construction work, the cost of the plant hire and any consumable items such as fuel needed for it’s operation, may be treated as materials for the purposes of calculating any deduction on account of tax

If the subcontractor owns the plant employed in executing the work no 'notional' deduction for plant hire may be made although consumable items such as fuel may still be treated as 'materials'.

http://www.hmrc.gov.uk/manuals/cisrmanual/CISR14260.htm
If the worst happens and the tax is payable i would request that the inspector issue a full refund of refundable deductions to the subcontractor concerned - this should may aid in recovering monies from subcontractor concerned.

"However I cannot find an area that states the contactor will be liable for such an error which for all purposes is the fault of the subcontrator"

It is the contractors resposibility to make the decisions and not rely on the fact that a subcontractor has done something like put materials on an invoice in the hope that they would get away with it - however if this is the case there is at least an argument that this is a genuine error - and the cis manual 340 section 4.45/4.46 says an appeal can be made.
http://www.hmrc.gov.uk/new-cis/cis340.pdf
I would like to think that any unbiased person looking at this would appreciate how hard it is to get everything withn CIS 100% perfect - after all no other self employed trades are subject to such complext deduction rules.

[IanWhite]

Thanks for your reply Robbob.

The issue relates to one of your quotes from the CIS manual. "if the subcontractor owns the plant employed in executing the work no 'notional' deduction for plant hire may be made although consumable items such as fuel may still be treated as 'materials'." I think the subby was indeed making notional deductions for his own plant though it was not obvious from his invoice.

I fear however the subby concerned may be under investigation for unpaid tax (this is to be comfirmed) and the Revenue have to decided it might be easier to get the tax off my client instead.This will of course mean it is unlikely my client will get paid.

I will read up on your appeal link concerning genuine errors and make a decision what to do. The situation at the moment seems most unfair.

Thanks for your reply.

Ian