Have I missed something?

[just1morethen]

First of all let me just say that while I am a practicing accountant, I deal with ltd company contractors for the most part and therefore my knowledge of the SA enquiry regime is a bit rusty. However, I have a client who is a self-employed CIS subbie. He recently received a notice of a "Compliance Check" into his 2006/7 SA return which was filed in May 2007. My understanding is that the time limit for HMRC to open an equiry is 1 year after the due date, so in this case 31/01/2009. Is this compliance check outside the enquiry framework and therefore not subject to the same rules?

TIA for any help.

[wamstax]

Yes you could have missed something as I understand matters.

CIS documentation and calculation for CIS subcontractors can be inspected for any time period in the previous 3 years. see http://www.hmrc.gov.uk/manuals/chmanual/CH21075.htm
Information from subcontractors
If you need to use a formal power to require information or inspect documents held by a subcontractor for the purpose of your check of a contractor’s obligations, you should use the powers in the CIS regulations. You can only inspect records relating to
the calculation or payment of amounts to the subcontractor under a construction contract in the previous three years, and
the direct costs of materials for those contracts.

I would emphasise however that you should check that HMRC are not trying something under the guise of a subcontractor visit. If they seek to look at any papers other than the basic Subcontractor documents.

It would of course be possible for HMRC to proceed by way of discovery (once the SA statutory one year period has expired) if they had evidence that your client had understated his/her income.

Personally I would contact HMRC to determine exactly why and under what powers they intend to carry out their compliance check before entertaining them. This would then enable you to ensure that your client's rights are protected. e.g. if it is only a check of the underlying documents in relation to a contractor then you can lock up all the records not mentioned in CH20175. Equally if they are chancing their arm to get a foot in the door you can ensure that they do not get a fishing expedition up and running.

[just1morethen]

Thanks for that Bill. The Revenue have sent us a letter saying that the income and tax deducted on their records do not match those on the SA return and they have provided a list of CIS vouchers and deductions to back up their claims. I think I'll do as you suggest and ask HMRC on what statutory basis they are asking for this information and take it from there.

[robbob]

Hello just1morethen

It's nice of the revenue to wait 2 or 3 years before digging up something like this isn't it.

Presuming the the turnover figure they have is larger than what is on the self assessment return, they will be arguing that a discovery is possible as your client did not provide full turnover details.

This discovery assessment will be under Section 29 TMA 1970
http://www.hmrc.gov.uk/manuals/sammanual/SAM20010.htm

Obviously the first question to ask is are the revenue figures provided in their list correct?
There is always the chance a voucher has been misdated or the turnover may have been accrued on the previous years self assessment return.

Further details re "making available is provided here"
http://www.hmrc.gov.uk/manuals/emmanual/EM3260.htm

[wamstax]

Hi Just1More,
Sorry now that you have expanded it is as Robbob says (he is usually right) that HMRC are proceeding by way of a Discovery enquiry. This of course gives them a lot of scope if the information that they have provided is correct. If they are correct (and they do get it wrong on occassions becuase of faulty information or matching information) then clearly you need to establish why you/your client got the figures returned wrong. Remember of course that the information they have will relate to when monies were paid and they may only have reviewed the one year. If for example your proper earnings basis included the figures in different years thenthe opportunity is for you to knock their discovery enquiry on the head before it goes any further.

If they are unfortunately correct then clearly you need to check with the client that there arent any other areas that are not correctly returned as you can imagine that when HMRC are on a roll they will try and be as intrusive as they possibly can be. Much better to be armed with the right information (coupled to reviews of your client's bank accounts - for those off record private jobs reflected in bankings or on purchases of materials not matching jobs) than to be taken by surprise once they are into their enquiry mode.

Any further questions ? feel free to pick our brains