HMRC Gone Fishing! – CIS Reviews of NHS Trusts

Before Christmas, we became aware of a new HMRC letter being sent out to our NHS Trust clients asking about its compliance with regarding the Construction Industry Scheme (CIS).

The letter was signed by the Deputy Director of HMRC’s WMBC Charities, Public Bodies & Complex Employment unit. The letters are addressed simply to the Trust with no named department. A letter that could easily go astray!

The letter starts gently and mentions HMRC’s offer ‘… to want to help you get things right.’

But then moves onto the ‘usual HMRC compliance letter’ language we have seen before quoting the legislation and the CIS Reform Manual, HMRC’s technical guidance on CIS.

Why Now?

The recent change (in April 2021) in the deemed contractor threshold to £3M over a rolling 12-month period is mentioned as is the point that as soon as a public body has exceeded the threshold it must register for CIS and start complying with the oh-so-complicated CIS rules!

What Next?

We have already been informed by some NHS Trust clients and contacts that they have had the letter and it can only be a matter of time before similar letters are sent out to other Trusts.

We know that HMRC had said it would step up its CIS compliance activity before the new CIS legislation was introduced in April 2021. Not only looking at the new rules ie the £3M over 12 months but also the pre-April 2021 rules ie £1M on average based on three accounting periods.

HMRC Bites

The letter ends with some information of where to obtain help and advice including the CIS helpline,

and then this final point:

‘If you do not deduct the correct amounts from payments on your construction activities, then we may charge you penalties.’

Technical Stuff

NHS Trusts are among the bodies named in Finance Act 2004/s59 (1) as liable to operate the Construction Industry Scheme as contractors if they spend over £3M on construction work.

NHS Foundation Trusts

Please not that generally where an NHS Foundation Trust (FT) is set up, it is not treated a contractor for CIS and therefore does not have to operate the Scheme. If you are FT and you operating CIS and want to stop, please let us know!

Who to Contact?

Please contact PSTAX if you have received an HMRC letter or if you have some queries regarding your CIS compliance or if you have any CIS training requirements.

Sudeep Ganguli

Written by Sudeep Ganguli

After graduating, Sudeep joined HMRC before moving to EY as an employment taxes specialist. In 2000, he began specialising in public sector tax issues, working with Duncan Groves and Nick Burrows. Before joining PSTAX in 2019, Sudeep was an Associate Director at RSM.

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