HMRC tax agent strategy - CIS repayments

My practice has received a letter under the HMRC strategy concerning "expenses larger than would be expected" for CIS sub contractors.  Frankly I am quite astonished.

I had been informed at a briefing by HMRC that the strategy was to weed out those agents who set themselves up to bulk process tax returns for subbies.  I have always considered myself very conservative when claiming expenses for CIS sub contractors.

I consider they fall into two categories.  Those who offer almost labour only where it would be very creative to find any expenses to claim and those who are just running a "proper" self employed business and who happen to work for larger contractors who fall under the CIS arrangements.

Having checked several of the clients (as advised by HMRC's letter) I find that the majority are businesses with the full range of expenses expended who just happen to do some work for often labour-only contracts with larger contractors.

On top of the amazing delays and aggravation in trying to get CIS overpayments repaid, I find any goodwill left in dealing with HMRC to be evaporating quickly.

Are these "threatening" letters more widespread than HMRC will admit  ? 

  • Malcolm, thank you for your feedback which we will send to HMRC. As it is a pilot it would be useful for you to also explain to HMRC why you consider that you should not be in the sample selected. This will help to develop the process going forward. We are interested in hearing feedback from others who have been sent a letter.

    For more information about the pilots see our news item  HMRC Agent Strategy – HMRC pilot visits to agents with CIS repayment clients – October 2013 and to find out the latest about HMRC’s Tax Agent Strategy sign up for our Webinar HMRC Tax Agent Strategy 7 November 2013
  • After posting here, I sent a letter to Helen Lock at HMRC Agent Learning & Support expressing my feelings.

    I also pointed out that many of the supporting notes were meaningless.  Section 4 is typical.  A sub contractor is lucky to get any payment in this current economic climate.  Rather than offering HMRC support to ensure that contractors issue the CIS vouchers, HMRC guidance is .........  " you must consider what steps your client can reasonably take to obtain confirmation of payments and tax deducted".

    I have politely requested a full list of all those clients of mine that HMRC considers at risk so I may carry out a meaningful and comprehensive review.

  • We have also received one of these letters.While we deal with a number of CIS subcontractors we can find only one who legitimately had higher expenses than normal.
  • We have also received one of these letters out of the blue , which could involve a lot of additional work - but will the client be willing to pay for this , since they could still be open to enquiry at a later date? We have no more than 20 subcontractors and probably less who have CIS deductions.
    Should we make more use of the white space on the tax return , but is this really looked at anyway?
    It is not as if we use the 3 line account.
    As I understand it , HMRC are ignoring the fact that the subbie may have claimed AIA on a van and are only comparing net profit after CAs with income.
  • Hi,

    We are a firm with a name beginning with A so were in the first tranche to receive one of these letters.  I was dismayed at the arrogance of the letter and spoke to HMRC to express my concern.  It turned out that we were a low risk category firm, but the tone of the letter left me in no doubt that they considered us to be at fault. If they have issues with tax returns they should raise an enquiry and get on with it, not snipe at agents as being at fault in processing suspected incorrect returns.  We certainly have nothing to hide.  I have in good faith circulated the checklist to all my staff but I think we already complete all necessary steps to ensure returns are completed correctly. Perhaps HMRC have forgotten the recession in the building industry, rates are down/stagnant, travel and other costs are up, so of course the ratios have changed.

    I would hope that the Institute is following this up as the intimation is that all agents act irresponsibly and that being a member of a well respected body such as ICAEW carries no weight at all.  I fully support the exposure of agents who act wrongly, but this is a one size fits all approach and does none of us any good at all.