CIS - failure to deduct tax - right of recovery from subcontractor

[avocado]

Dear all
During a PAYE visit at a client yesterday, HMRC have identified gross payments totalling £500k to one subcontractor who was not entitled to be paid gross. The payments cover 2004/05 and 2005/06. Worse still, the subcontractor did not (and still does not) hold a registration card! HMRC predictably want 18% of £600k from our client, and will no doubt raise an assessment in due course.

My questions are:
1. Will the subbie - who operates as a limited company - be able to recover the 18% deductions against corporation tax? Presumably he will need the CIS vouchers, so he must register first?
2. Does our client have a right to recover the 18% from the subbie company?
3. If it can be demonstrated that the subbie company has paid tax in full already, can HMRC be persuaded to short cut the system, so that rather than collect the 18% from our client and repaying it to the subbie, they might leave things as they are (though there will be an interest charge I guess).
Any other observations will be very welcome!
Regards

[Bob Jones]

I see that no one has dared to answer this question .... my advice is to ask HMRC direct. At one time HMRC satff used common sence - this is becoming a rareity these days - seems that on oaccasions they are quite content to take tax twice on the same money...

Bob

[AvocadoK]

Thank you Bob
I have now read in IR14/15(CIS) that HMRC 'may waive' the amounts if the subcontractor has paid his tax, so at least the officer should feel confident in using her common sense!
Regards
Avocado

[avocado]

Bob (and other interested parties)
Three months later,HMRC have agreed to 'waive' the deductions, apparently after the officer dealing with our client confirmed with her colleague dealing with the payee company that its tax affairs were up to date. So it can be done - just be patient!
Regards
Avocado