Around 860 agents have been identified to participate in the latest Construction Industry Scheme (CIS) Repayment Pilot by HM Revenue & Customs (HMRC).
The pilot is going to run through to December 2013 and involves HMRC writing to agents with ‘low risk’ CIS client portfolios that generate higher than expected refund claims. Accountancy practices have already started to receive the letters from the HMRC Agent Learning and Support Team.
A typical letter is repeated word for word below:
Dear Sir or Madam
Why we are writing to you
As part of HMRC’s Tax Agent Strategy we are seeking to improve our guidance and support offer. We are currently looking at how we can best target specific educational interventions and the impact they may have on repayment claims from the Construction Industry Scheme.
You have been selected to participate as a significant number of Self Assessment Income Tax Returns from your clients have included claims for expenses larger than we would normally expect to see. HMRC understands that there may often be good reason for certain claims being larger than normal. However some claims can lead to further enquiries into aspects of the tax returns which can be costly for both your clients and HMRC.
What we would like you to do
We know that the vast majority of agents aim to provide a professional service that helps their clients get tax right without the need for any HMRC compliance checks. We want to support your work in this area and with this in mind, HMRC would like you to
- review your processes for checking information that relates to expenditure claims
- check record-keeping obligations, so that requirements are met to at least the minimum standard
- consider applying the principles of the enclosed Good Practice Guide and checklist
- avoid a formal compliance check where possible.
As part of our commitment to help you, our Agent Support Officers (ASO) are available to provide you with education and support. Following the review of your processes please contact an ASO if necessary.
Agent Learning and Support Team
A supporting schedule titled Frequently asked questions is attached to the letter….
Is this a formal enquiry?
This is not a formal enquiry or compliance check. We know that most agents aim to provide a professional service to their clients and help them avoid formal enquiries.
Why are you writing to me now?
You are one of a number of agents we have identified who submit SA Returns where your CIS clients’ expenses are higher than the average that HMRC normally sees from people in this industry. We would like you to review your processes to ensure that all of your clients are submitting accurate returns.
Am I obliged to engage with HMRC?
Although this is not a formal compliance check, we would like you to consider the information provided. The main focus of this exercise is on preventing errors in the future but if you are concerned that any of your clients might have made mistakes in their previous tax returns there are standard procedures that they can use to put things right.
For further information on correcting errors please visit http://www.hmrc.gov.uk/
To learn more about your rights and obligations go to
…..as well as a CIS Client Accounts Checklist, a Construction Industry Scheme Good Practice Guide and a CIS Checklist – Supporting Notes.
This is the latest attempt by HMRC to clampdown on CIS repayments to subcontractors. The HMRC Fraud team in Leeds is into the second year of its programme focused on High Volume Agents (HVAs), who are considered to have ‘high risk’ CIS clients. HMRC is keen to stress that this pilot is an educational research project and not a compliance intervention similar to the work it is undertaking with HVAs.
Author: Guy Smith, Senior Tax Consultant on the ReSource Tax and VAT Consultancy Team.