In the last year, the public sector has experienced an increase in CIS compliance reviews carried out by HMRC. These reviews were typically triggered by CIS compliance errors or voluntary disclosures. However, recently, the reviews appear to be occurring randomly without any obvious CIS compliance issues.
In this article, Sudeep Ganguli, PSTAX Employment Taxes Senior Manager, will explain how to prepare for an HMRC CIS review, offer options to consider and provide recommendations for handling such reviews.
Understanding HMRC’s CIS Compliance Review
When HMRC plans a CIS compliance review, they will notify you in advance to agree on review dates and request any CIS policy and procedure documents. At the initial meeting, the HMRC officer(s) will go over all your CIS procedures, including how you identify a new supplier as a subcontractor providing construction services. HMRC will also review employment status checks for new workers to determine if any workers should be on the payroll or fall under the scope of the Off Payroll Working rules. Please note this should always be done before CIS verification.
HMRC will have already assessed your compliance record in terms of the monthly returns and timely payment of the CIS tax deductions. During the on-site visit, HMRC will examine accounts payable to identify any supplier payments related to construction operations that have not been included in your CIS300 monthly returns.
Many of our helpline CIS inquiries pertain to CIS scope or ‘mixed’ contracts covering both CIS-related work as well as work that would not normally be within the scope of CIS.
The next check will ensure the CIS tax deductions and statements are correct. This involves reviewing the labour and materials split and looking out for unreasonable or fixed percentage cost of materials or estimates.
At the end of the site visit, there will be a debriefing meeting and possibly a request for additional information. The review will conclude only when all queries are resolved and any underpaid tax, interest and penalties are settled.
If you are aware of an impending HMRC CIS review or have concerns about your current compliance with the CIS regulations, please let us know. We can assist you throughout the process, including on-site support during HMRC officers’ visits. Alternatively, we can provide support while working behind the scenes.
Leveraging our extensive experience with HMRC and CIS technical knowledge, we can help mitigate liabilities and expedite the review process.
If you have not had a CIS compliance review (at all or not recently), we can conduct an HMRC-style review to identify issues and make recommendations. This may include a voluntary disclosure to HMRC if necessary, which can result in lower or even zero penalties.
We will thoroughly review all relevant CIS policy and procedure documents and update them where needed.
Many clients seek CIS training from PSTAX. The holistic training courses are not only for people in finance who deal with CIS but also for colleagues in procurement, HR (employment status checks), property, estates and resources/facilities and project or site managers responsible for subcontractors or CIS related work.
If you are not currently registered as a CIS contractor, but your expenditure is close to or exceeding the deemed contractor limit (£3 million on a rolling 12-month basis), please let us know. We can assist you with the CIS registration, and any HMRC disclosure.
Proactive HMRC CIS Compliance
Given the increase in HMRC CIS compliance activity, we recommend discussing your CIS policies and procedures with PSTAX to ensure you are compliant. It may be only a matter of time before you have to face an HMRC CIS compliance review or an employment taxes review that includes CIS.
PSTAX has significant experience in dealing with HMRC, compliance reviews and CIS so please don’t hesitate to reach out to us.