Construction Industry Scheme Tax Withheld By HMRC

In August 2011 we made a request under the Freedom of Information Act 2000 for HMRC to disclose at a national level how much CIS tax had been collected on behalf of sub-contractors, but not repaid or credited to them, in the tax years 2008, 2009 and 2010.

We made this request because of the obstructive behaviour of HMRC when we tried to resolve one particular client’s tax problem. We knew the client was due a refund of more CIS tax than we had paperwork for, so we asked HMRC how much they were holding according to their own records. Despite repeated requests HMRC refused to tell us. Imagine a bank refusing to tell you how much money is in your account! HMRC is not a bank but it is still holding a large amount of money belonging to sub-contractors, money which they worked hard to earn.

HMRC did not provide the information at first, but after requesting an internal review of HMRC’s initial response, the information was disclosed on 9 September 2011. There can be no doubt that HMRC did not want to reveal this information.

HMRC replied to our question with a set of figures showing that they were still holding a staggering £1,031,000,000 of tax which was due to sub-contractors, but had not been repaid or credited.

Much of this (HMRC suggest) will relate to migrant workers who don’t complete a tax return and therefore who can’t reclaim the tax. Our concern is with the sub-contractors here in Cornwall who do complete tax returns – but don’t get all their tax back.

Obtaining this disclosure is another step towards showing how HMRC needs to become more efficient in collecting tax from where it should come from, instead of burdening small businesses by making it difficult for them to reclaim the CIS tax which is rightfully theirs.

Although we must all pay our taxes, we believe that small businesses should be treated with more respect by government bodies like HMRC.

In 2012 we asked HMRC how much of this £1billion relates to people who have submitted tax returns (and therefore where HMRC should know if a refund is due) and HMRC replied that the information is too expensive to locate within the scope of a Freedom of Information request. Surprised?


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