HMRC’s enforcement powers under the subcontractor regulations are similar to those under the PAYE regulations. If the contractor has not paid over to the collector the tax deducted within 14 days of the end of any income tax month, the collector can, if he is unaware of the amounts outstanding, serve a notice on the contractor, requiring him to make a return of the name and address of each subcontractor to whom payments under deduction have been made, together with the information needed to compute the correct liability. The collector can then certify the amount of the liability by a notice sent to the contractor, and that certificate will be evidence of a debt which can be recovered in the normal way unless and until the contractor supplies information which shows that the true liability is less.
If there is a dispute between the subcontractor and the contractor as to the correct amount due, or the inspector has reason to believe, as a result of an inspection of the contractor’s records under the regulations, that the amount due from the contractor exceeds the amount he has paid, the inspector may, at his discretion, make an assessment on the contractor. Interest runs from the fourteenth day after the end of the income tax year to which it relates.
Penalties can be imposed in respect of late and/or incorrect end-of-year returns made by contractors. These provisions are the same as those which apply to PAYE end-of-year returns.
HMRC have the same powers to inspect documents to ensure that the system is being operated correctly as they have under the PAYE regulations.
Authorised HMRC officers are entitled to:-
- inspect contractors’ operation of the CIS scheme;
- inspect the required records at the ‘prescribed place’;
- copy, extract, remove records/documents produced for inspection;
- inspect non exempt subcontractors’ records relating to payments received as a subcontractor;
- inspect subcontractors’ tax certificates; and
- inspect subcontractors’ records of payments to certificated subcontractors.
The Revenue and the Contributions Agency published in October 1995 a new leaflet giving guidance to contractors in the construction industry on the employment status of workers they engaged. The leaflet was produced in consultation with construction industry representatives and explains how the general law on employment status applies to the particular circumstances of the industry.