HMRC’s records show that some contractors have made incorrect CIS tax deductions. As part of its latest one-to-many campaign, HMRC is reminding contractors that they must: 

• verify all new subcontractors before they pay them;
• verify subcontractors they’ve used before if they haven’t included them on a CIS return in the current tax year, or the previous two tax years; and 
• make sure they apply the correct CIS deductions.  

The contractor can verify subcontractors using HMRC’s online service or using commercial software. The contractor must use commercial software if they want to verify more than 50 subcontractors. 

HMRC says that it may open a compliance check if the contractor does not take any action. If HMRC starts a compliance check and finds errors in a CIS return, it will treat a disclosure made by the contractor as prompted. This could increase the amount of any penalties the contractor may have to pay.

Further information

• Example letter provided by HMRC
• ICAEW’s dedicated CIS webpage
• HMRC’s CIS: a guide for contractors and subcontractors (CIS 340)