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If HMRC has opened a compliance check regarding your Construction Industry Scheme (CIS) deductions or you need to correct errors in your CIS submissions, understanding the process and knowing how to respond is crucial. Here, we provide an overview of CIS compliance checks, outlining what to expect and how we can help you brings matters to a conclusion.
What is the Construction Industry Scheme?
The Construction Industry Scheme is a set of regulations introduced by HMRC to streamline and ensure the proper taxation of construction work. Under CIS, contractors deduct money from subcontractors' payments and pass it to HMRC. These deductions count as advance payments towards the subcontractor's tax and National Insurance. The scheme applies to all construction work carried out in the UK, including site preparation, alterations, dismantling, repairs, decorating, and demolition.
Key components of CIS include:
Registration: Contractors must register for the scheme. Subcontractors can choose to register, which allows for a lower rate of deduction.
Verification: Before making payments to subcontractors, contractors must verify their CIS status with HMRC.
Deductions: Contractors deduct a portion of the payment to cover subcontractors' tax liabilities. The standard deduction rates are 20% for registered subcontractors and 30% for unregistered ones.
Monthly returns: Contractors submit monthly returns to HMRC, detailing all payments made to subcontractors and the corresponding tax deductions.
What is a Compliance Check in Relation to CIS?
A CIS compliance check is an examination conducted by HMRC to ensure that businesses in the construction industry are adhering to CIS regulations. These checks can be routine or triggered by discrepancies in tax submissions or business operations. The primary objectives of these checks are to verify:
Accurate deduction and reporting of tax by contractors.
Proper registration and verification of subcontractors.
Correct submission of monthly returns and payments.
Focus Areas During a CIS Compliance Check
During a compliance check, HMRC will review the contractor’s records and processes to ensure they are meeting CIS requirements. This involves checking documentation, verifying the accuracy of deductions and payments, and assessing the timeliness and accuracy of monthly returns.
What Are HMRC's Powers?
HMRC has the authority to request information and documents to determine whether you have underpaid tax and to understand the circumstances leading to any underpayment. These requests can be extensive, and HMRC could even request to inspect business premises.
Such enquiries can be highly disruptive and stressful for both individuals and businesses. By appointing a qualified adviser to handle communications with HMRC, you can continue focusing on growing your business while ensuring a quicker resolution of your case.
Consider seeking advice from a specialist such Tax Dispute Experts. We can provide valuable insights and help ensure that your processes align with HMRC requirements.
CIS Compliance Check Penalties
Once a CIS compliance check has been resolved, HMRC may impose penalties. The severity of these penalties depends on the behaviour that led to the inaccuracies in your returns and the level of cooperation demonstrated during the enquiry. Utilising a specialist can significantly help in reducing or even removing these penalties by ensuring accurate disclosures, effectively communicating with HMRC, and addressing any issues promptly and professionally.
How Our Tax Dispute Experts Can Help
Navigating CIS compliance checks can be daunting, but our team of tax dispute experts is here to support you every step of the way. We offer comprehensive services to ensure your business adheres to regulatory requirements and mitigates any potential risks.
During a compliance check, our team will:
Represent Your Interests: Manage all communications with HMRC to ensure professionalism and efficiency throughout the process.
Prepare Detailed Documentation: Collect and organise all necessary documents, ensuring submissions are accurate and complete.
Review Business Practices: Analyse your business operations and records to identify and address any compliance issues.
Provide Strategic Advice: Develop tailored strategies to navigate the compliance check and resolve any identified.
Contact Us
Need assistance with an HMRC enquiry? Contact us today to speak with our Tax Dispute Experts and protect your interests.