CIS tax not paid resulting in HMRC check

[thequestionman]

Hi all

a client was getting paid net of CIS deductions for a few years. the contractor never provided any statements for the client despite repeated requests for them. at the time this was his only source of work so he couldn't afford to do anything about it. he has invoices to them showing the CIS to be deducted and the net amounts match what was paid but of course HMRC wont accept this as proof obviously.

since then HMRC have checked 2 years returns saying no CIS was deducted on his behalf and as he has no proof they want it all back plus a sizeable penalty

is there anywhere to turn at this point? i have no doubt the client was getting the CIS deducted from him but the contractor has since closed down and restarted under a different name. HMRC have tried to contact them but had no response. i feel they are just not bothering to pursue the contractor properly and see my client as the easier target to get the money back

thanks as always in advance

[robbob]

Hello the questionman

he has invoices to them showing the CIS to be deducted and the net amounts match what was paid but of course HMRC wont accept this as proof obviously.

HMRC will normally accept sales invoices and bank statements - although i can understand their reluctance to pay a refund if there is an element of doubt as to whether there is some sort of collusion going on here - this is very unlikely to be the case for any established subcontractor who has being going for years and normally has chitties available. The hmrc manual does seem to indicate that bank statements and sales invoices is reasonable proof - so perhaps pointing them to the relevant section in the manual may suffice

If the Bank statements coupled with the PDS’s only partially back up the entry made on the Self Assessment return;

the compliance officer should restrict the claim to what can be evidenced by way of Bank statements and PDS’s or Invoices

Reading the above bank statements and invoices is sufficient if you ignore the fact there there are no PDS' at all for the year so technically its not a situation where the PDS's partially match (although one other contractor with PDS's would suffice to meet that requirement)

http://www.hmrc.gov.uk/manuals/cisrmanual/cisr74030.htm

[thequestionman]

thanks for the response. I'm copying and pasting just now