HMRC have recently released a YouTube video, aimed at Subcontractors, explaining that Contractors in the Construction Industry Scheme (CIS), who make CIS deductions, are required to ensure that the cost of any materials charged on the invoice is correct, and if no evidence is provided, the Contractor can make an estimate based on what they think is reasonable.
For further guidance on the treatment of materials in the construction industry scheme, please see our Materials Guide here.
Please note that HMRC were already looking closely at the materials costs included on CIS returns and opening reviews into businesses where the element of materials of payments appears excessive. The publication of this video is further evidence that HMRC regard this as a risk of tax loss and we strongly advise that you review your processes.
Invoicing for materials YouTube video
We feel that, further to the release of this video, there is a strong possibility that HMRC will follow this up by launching a ‘One to Many’ targeted campaign. The is likely to result in HMRC seeking to collect additional tax from contractors that do not retain sufficient evidence to support the amount charged by subcontractors for materials.
If you receive a letter from HMRC, please do not ignore this or it could put you at risk of higher penalties if HMRC later challenge successfully.
Regardless of whether you receive a letter or not, we recommend that you review your procedures to ensure these are robust and are sufficient to protect your business from risk.
If you have any questions about any of the above or would like assistance with this or other issues related to the Construction Industry scheme, please speak with your usual Menzies contact or James Stokes (CIS specialist).
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