Suggested letter to be issued where the subcontractor is not a limited company – see COG909235

Check of Employer Payment Summary (EPS) – tax period ended [user in insert date]

You have claimed a deduction of £[user to insert amount] on an EPS for the tax period ended [user to insert date] representing Construction Industry Scheme (CIS) deductions made from payments you received for work in the construction industry.

Only limited company subcontractors can set off CIS deductions against their employer (and contractor) liabilities and do so my claiming the total monthly deduction on an EPS.

Subcontractors who are not limited companies must claim the CIS deductions made from the payments they receive on their Self Assessment returns. The deductions are treated as payments on account of tax and Class 4 National Insurance Contributions payable on their profits.

What you need to do now

Please let me have your explanation as to why you claimed the CIS deductions on an EPS. If you consider the claim to be correct you will need to tell me why. Please let me have your reply by [user to insert date]. If you prefer to telephone me you can contact me on the number shown at the top of this letter.

Completing the check

If you agree that you should not have claimed any CIS deductions on the EPS you should submit an EPS with the correct year to date figures.

After the check is completed

When submitting your Self Assessment return you can only claim the CIS deductions that were made from payments you received for work in the construction industry. My check has shown that the amount claimed on the EPS exceeds the amount contractors have reported to HMRC.

If you have already submitted your Self Assessment return and included the higher amount, you will have to amend your return unless you can provide evidence that the additional deductions were made.

If you have not yet submitted your Self Assessment return you must only include the deductions that were made by contractors. If this differs from the amount shown on our records you may be asked to provide evidence that the additional deductions were made.

Helping us with our check

If my check shows that you have submitted an incorrect or inaccurate return we may charge you a penalty.

Although you do not have to help us with our check, if you do, it will help to reduce the amount of any penalty that we may charge if we have found something wrong. In deciding whether to help us you may like to consult a tax adviser. There is more information about this in our factsheet CC/FS9 The Human Rights Act and penalties enclosed.

I enclose our factsheet CC/FS7a Penalties for inaccuracies in returns or documents which contains information about how you can avoid a penalty and about the penalties for different types of error.

More information about the check

I enclose factsheet CC/FS1a General Information about compliance checks which gives you more information about this type of check. If you have any queries once you have read this, please call me on the above number.

*I have sent your adviser/advisers [user to insert name of adviser/advisers] a copy of this letter.

OR

*If you have an adviser acting on your behalf you may wish to show them this letter.

* Delete as appropriate