DMBM524605 - Debt and return pursuit: CIS: in-year and end-of-year process: overview and legislation

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CIS EOY Process 2006-07 and earlier

For years 2006-07 and earlier the contractor submitted a CIS36 (for sub-contractors) and P35 return (for any employees) to HMRC by the 19 May each year.

Once these were accepted, Employer Business Services (EBS) advised BROCS of the amount of any Tax/NIC deductions due from the employer/contractor shown on the P35 and CIS36. The totals from the returns were then compared to the amounts paid over to BROCS for that year. Where the two did not balance BROCS sent appropriate reminders before referring an underpayment or overpayment work item to IDMS for pursuit. This procedure will not change for any work items for years 2006-07 and earlier.

CIS EOY Process 2007-08 onwards

From April 2007, contractors are required to make CIS monthly returns (form CIS300) setting out details of deductions made from subcontractors, full details of this process are covered in DMBM524020.

Details of the contractor monthly returns are recorded on the CIS system and collated at the end of the tax year. This means that the CIS36 is no longer required, so 2006-07 was the last year that the annual return CIS36 was required for contractors. Contractors, who are also employers, are still required to submit an employer’s annual return, and they should continue to include on this the total amount of CIS deductions made from subcontractors in order to help them agree payments made to deductions due.

CIS monthly returns

The changes brought in with CIS mean for year 2007-08 onwards the CIS deduction figures will no longer come from EBS, but from CIS which will send an aggregate amount of deduction from the CIS monthly returns to BROCS up to 2013-14. These changes do not change the end of year reconciliation on BROCS process but they do have an impact on debt management end of year processes for P(SC) and XP schemes. From 2013-14 onwards CISR sends details of the CIS Return charges every month to ETMP.

Legislation supporting end of year

The Income Tax (Construction Industry Scheme) Regulations came into effect on the 6 April 2005.

Monthly returns and end of year

Where a return has been received for PAYE Underpayments the following legislation still applies.

  • Para 76 of the Income Tax (Pay as you earn Regulations 2003) still applies for pursuit of any PAYE
  • Reg. 42(4) of the Education (Student Loans) (Repayments) Regulations 2000 for Student Loan deductions
  • Para 17 of Schedule 4 Social Security (Contributions) Regulations 2001 for National Insurance Contributions.

For England, Wales, Scotland and Northern Ireland Reg. 10(6) of the Income Tax (Construction Industry Scheme Regulations 2007) supplements these and allows us to use the details on the CIS monthly returns at the end of the year to pursue any underpayment relating wholly or in part to unpaid CIS deductions. This applies to CIS end of year cases for returns for years 2007-08 onwards.

Interest on amounts unpaid

Up to 2014-15, interest continued to be charged from the 19 April following the end of the deduction year or from the 22 April for electronic payments. From 2014-15 onwards, interest is charged monthly.

If a contractor asks under what authority you are charging interest on CIS end of year underpayments inform them as follows.

England Wales and Northern Ireland

For years 2006-07 and earlier, continue to use Regulation 16 of the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993.

For years 2007-08 and later, use Regulation 14 of the Income Tax (Construction Industry scheme) Regulations 2005 applies.

For the years 2014-15 and later, use Section 101 Finance Act 2009.

Scotland

For years 2006-07 and prior continue to use:

  • Regulation 16 of the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993
  • Regulation 41 of the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993
  • Regulation 13 of the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993.

For years 2007-08 and later use:

  • Regulation 14 of the Income Tax (Construction Industry Scheme) Regulations 2005
  • Regulation 12 and 51 of the Income Tax (Construction Industry Scheme) Regulations 2005
  • Regulation 11 of the Income Tax (Construction Industry Scheme) Regulations 2005.

The IDMS Particulars of Claim, Particulars of Debt and appropriate IDMS forms for both CIS (Tax) and interest have been changed to reflect the above.

A copy of the CIS regulations can be found in CISR10000.