In this section:
- HMRC will no longer provide bulk payment and deduction details for subcontractors in the Construction Industry Scheme (CIS)
HMRC will no longer provide bulk payment and deduction details for subcontractors in the Construction Industry Scheme (CIS)
The provision of payment and deduction details to subcontractors and their agents has become a growing problem. We will no longer provide this information on a bulk basis but will continue to help any subcontractor that has a genuine need for this information.
The Construction Industry Scheme (CIS)
Within the construction industry, a subcontractor is a person or body that has agreed to carry out construction operations for a contractor. When paying the subcontractor for construction operations, contractors must follow the statutory rules of the Construction Industry Scheme (CIS). Under the Scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s payment status as determined by HM Revenue & Customs (HMRC). In the majority of cases, the contractor is required to make a deduction from that part of the subcontractor’s payment that does not represent the cost of materials incurred by the subcontractor. These deductions must then be paid over to HMRC on a monthly basis where they are held as a credit towards the subcontractor’s final liability to tax and National Insurance contributions (NICs).
On making payment to any subcontractor from whom the contractor is legally required to make a deduction, the contractor is obliged to give to the subcontractor a ‘payment and deduction’ statement. This document gives the subcontractor the contractor’s reference details and shows;
- how much has been paid for the job
- how much has been allowed for the cost of materials supplied by the subcontractor in doing that job and, crucially
- how much has been deducted from the subcontractor’s payment
Generally, subcontractors are either self-employed individuals working on their own or within partnerships or are limited liability companies. As businesses in their own right, all subcontractors are under a legal obligation to keep and preserve whatever business records are appropriate to enable them to make full and accurate returns of their profits at the end of the tax year or their accounting period. Payment and deduction statements given to them by contractors for whom they have worked will often form the basis of many smaller subcontractors’ records of receipts.
Contractors are also required under the rules of the Scheme to submit a monthly return to HMRC showing details of all subcontractors paid in the month together with details of all deductions made on a subcontractor by subcontractor basis.
What is the problem?
For a number of reasons, historically, some smaller subcontractors have often failed to keep the records of payments given to them by contractors perhaps because they have lost them or otherwise destroyed them. HMRC is also aware that a very small number of contractors, despite their legal obligations to do so, fail to give their subcontractors the required payment and deduction statements on one or more occasions. If the subcontractor has not kept any other business records, the loss, or non-receipt, of the necessary payment and deduction statements can cause difficulties. This is because when it comes to the completion of their annual return, whether under Self Assessment (SA) for individual or partnership subcontractors, or CTSA for corporate subcontractors, they no longer have a full record of their earnings and receipts.Contacting HMRC for payment and deduction information
Subcontractors who believe they do not have a complete record of their payments and deductions at the year-end tend to contact HMRC for help. Typically, these subcontractors ask HMRC to give back to them details of their payments and deductions as reported on the returns of contractors for whom they have worked during the period, or year, in question. HMRC is often able to help out with this information where the subcontractor clearly has a genuine need for it. However, providing details of all payments and deductions reported on contractors’ returns can cause problems. HMRC cannot know at all times which contractors a subcontractor may have worked for nor can it ever be fully aware of what payments and deductions may have been made by any particular contractor. This is because the information held by HMRC is only as good as the information that contractors have returned. Although contractors are under a legal obligation to report this information to HMRC on a monthly basis, there have been occasions where a contractor’s monthly return has not been accurate, complete or even received by HMRC in the first place. Subcontractors that rely on this information as a complete record in order to complete their own tax returns run the serious risk that they are making an incorrect or incomplete return and could be making themselves liable to a penalty for doing so.What’s Changing?
Over recent years, the provision of subcontractor payment and deduction details to subcontractors has become a growing problem with many subcontractors and some agents seeking to obtain this information from HMRC rather than keep their own records. This has led, in a number of instances, to excessive demands being placed on HMRC’s resources when requests have been made for payment details for scores of subcontractors at a time.
The HMRC CIS computer system was designed for HMRC staff to access information on a subcontractor by subcontractor basis in their normal day to day work. It was never intended to supply long lists of payments in paper form to subcontractors and their agents.
One of the aims of new CIS was to improve subcontractors’ compliance with their tax obligations. Continuing to provide this information, on demand, would simply condone the subcontractors’ failure to meet their obligations.
We would like to remind subcontractors that they should keep all records they are given by contractors during the year. If a contractor is not giving payment and deduction statements to subcontractors when it should be, the subcontractor should notify HMRC so that steps may be taken to rectify matters with the contractor.
In order to stem the ever rising number of time and resource-intensive, multiple and bulk requests for data that HMRC is receiving, the Department will no longer be able to provide this information on a bulk basis.
When will information be supplied?
Requests for missing details from individual subcontractors or their agents will continue to be provided when they can demonstrate that they have been back to the contractor concerned to request a duplicate or missing payment and deduction statement but have failed to obtain one. In cases where it is alleged that a contractor has refused to issue one or more original payment and deduction statements, HMRC will require the subcontractor or their agent to give details of the contractor so that further enquiries may be made.
Once we are satisfied that a subcontractor has tried to obtain details of the missing payment and deduction statement, we will supply the missing information if we possibly can and, of course, where the information is currently held on the HMRC CIS system.
We won’t, however, automatically be able to provide lists of all payments and deductions covering a full tax year.
We hope that our customers will understand that dealing with these requests is very time-consuming and resource-intensive for us. We do, therefore, need to look at how we can limit the number of requests without reducing our service to those who show that they have a genuine need for this information.
This section was added on 25 July 2008.
Can agents or subcontractors request this information under the Freedom of Information or Data Protection Act?
Individuals have the right under section 7 of the DPA to be provided with a copy of their personal data. However, there are several exemptions to the disclosure provisions, including those in s29 of the Act.
While each request is considered on its own merits it is considered that releasing details of the payments and deductions held by HM Revenue & Customs could impact the assessment or collection of tax.
Requests from agents for details of their clients’ payments under the Freedom of Information Act are exempt under the terms of s44 of the Act. Requests from individuals made quoting the FOI Act are exempt under s40(1).
