Further details have started to emerge surrounding the Construction Industry Scheme (CIS) repayment pilot, which HM Revenue & Customs (HMRC) launched on 21 October 2013. The pilot is due to run through until the end of December 2013.
More than 860 agents were selected by HMRC to be contacted because of a perceived risk in the repayments being submitted on behalf of their subcontractor clients. HMRC believes the agents involved are claiming repayments ‘higher than the market average’, which is typically when a subcontractor claims expenses in excess of 20% of their total turnover.
Around 700 of the 860+ agents have received a letter from HMRC, including a best practice checklist, inviting the agent to review their processes for checking the income declared and expenditure claimed for by their subcontractor clients.
Approximately 160 of the remaining 860+ agents are being invited by HMRC to have an educational visit because their subcontractor clients pose a higher risk.
Some of our accountancy clients have received their letters and subsequently telephoned our helplines to express their surprise at being chosen, usually because they have so few subcontractor clients. Others have asked why they have received a letter when they are members of a professional body and abide by minimum accounting standards as a matter of course. A few have treated the letter as an HMRC circular and put it to one side for review later. A common criticism is the belief that HMRC is trying to turn agents into pseudo Tax Inspectors and asking them to do HMRC’s job.
The professional bodies have been involved with the preparation for the pilot and had an input into the content of the best practice checklist. However, they have expressed their concern to HMRC that if agents have to do more to ensure their clients’ compliance, clients may stop using agents and try and deal with their tax affairs on their own, which could create more problems.
HMRC has responded by saying it is going to be asking agents to do more to ensure their clients compliance moving forward and will be seeking assurance that agents understand what good looks like. Further pilots are in the pipeline.
This pilot is in addition to the work HMRC is already undertaking with High Volume Agents. HVAs are deemed to have the highest risk subcontractor clients and are being subjected to far greater intervention by HMRC. HMRC has advised the Compliance Reform Forum that a communications pack is being developed to raise awareness of HVAs.
A copy of the latest minutes from the Joint Tax Agent Strategy Steering Group can be viewed here http://abytx.co/1ejwXOq
Author: Guy Smith, Senior Tax Consultant on the ReSource Tax and VAT Consultancy Team.
- HMRC begins CIS Repayment Pilot; 860 agents targeted (abbeytaxblog.co.uk)
- HMRC’s CIS Client Accounts Checklist (abbeytaxblog.co.uk)
- HMRC’s CIS Good Practice Guide (abbeytaxblog.co.uk)
- HVA Memorandum of Understanding with HMRC (abbeytaxblog.co.uk)
- HMRC’s Tax Agent Strategy (abbeytaxblog.co.uk)