HMRC have recently begun issuing one-to-many letters to contractors in the Construction Industry Scheme (CIS) to prompt them to ensure the status of subcontractors is correctly verified and the correct amount of tax deducted from payments made.
HMRC started sending letters on 22 July 2024. Contractors have 45 days from the date of receiving the letter to verify their subcontractors' CIS status. New subcontractors must always be verified when commencing work for a contractor. Subcontractors who have been used before but have not been included on a CIS return in the current tax year or the previous two years must also be verified.
HMRC have already targeted the Insurance Sector about CIS. In trying to close the tax gap they will inevitably take a hard look at one of the most valuable sectors in the economy.
Useful guides on this topic
CIS: Contractors and Subcontractors
What is the Construction Industry Scheme? Who does it apply to? How does it work?
Construction Industry Scheme one-to-many letters
HMRC have issued the latest round of one-to-many letters, focusing on Construction Industry Scheme Insurance Sector Registrations.
Ignorance of tax rules bolsters the tax gap
HMRC have published their annual estimates of the 'tax gap'. Ignorance of tax law as in 'failure to take reasonable care' by small businesses is blamed for a large percentage of the tax gap primarily through a lack of Income Tax and Corporation Tax receipts.
External links
HMRC One to Many letter - Incorrect CIS Tax Deductions (verifying subcontractors)
