The New Construction Industry Scheme will be officially one year old in two weeks; on April 6th 2008. After a very shaky start with plenty of mass confusion, hysteria and technical glitches, have HM Revenue & Customs (HMRC) and the construction industry finally gotten their systems “bedded down” for new CIS compliance or are there still problems?
Last year, I raised some concerns about the implementation of the systems supporting the new construction industry scheme rules. Amongst these concerns the biggest issue was that subcontractors working for larger contractors who verified online would be discriminated against as it was statistically more likely that their tax treatment status would be returned unmatched (30% deduction) as opposed to net (20% deduction) which could lead to serious cash flow issues.
Verification service problems…
The principal issue of this concern is that when a contractor makes an online verification the process is strictly made by a matching engine at HMRC, which if it cannot positively identify a subcontractor will return “unmatched” with a reference number. It is then up to the subcontractor to claim back the excess tax payment directly from HMRC. As I mentioned last year, this is more likely to occur when the contractor uses an online batch verification method. Smaller contractors are more likely to use the phone to work with a human operator to correctly identify the subcontractor’s tax treatment status, whereas larger contractors may not be so inclined. Anecdotally, we received plenty of reports of this type of system behaviour (where the online system could not match a subcontractor, but a telephone call could) last year, but nothing since. This might be due to contractors getting used to the mechanics of the verification system or HMRC relaxing their online matching rules or tightening their telephone service. We left this issue with HMRC last year and they asked us to forgive and forget the concerns to date and only report new ones.
Online filing problems…
Since last September there haven’t been any major issues to speak of. The service has been mostly reliable, although at times filing online can be ineffably slow. We recommend to all our customers not to leave submissions until the last minute and try to make the submission in the mornings. The Government Gateway is changing in April to use an adjustable and slower polling interval. If you are submitting at peak times, it could be that the Gateway will not expect to have a response for you for up to an hour. Take the stress off yourself and the online services and make your monthly return early 🙂
Online services helpdesk…
We still get a lot of customers calling asking us to check their tax office reference number (which we cannot do, as we do not have access to your tax records..). HMRC still seem to routinely confuse people with their online filing credentials. Tax office reference and tax office numbers still cause confusion for people, particularly when the online helpdesk give out the wrong details and blame the software vendor. Wrong answer, HMRC – sort it out please. Luckily a customer can only have this problem once when they attempt to file online for the first time.
We get a lot of queries from people who aren’t activated for filing e-CIS too. Our advice is to call HMRC and get them to activate your account.
Offline / paper service problems…
Since Christmas, we have noticed an increase in queries from contractors who have been fined (fines started in October, but gross payment “black marks” started last April). Despite HMRC saying that paper online returns would be phased out last year, they apparently still allow them. The contractors who have contacted us receiving fines all sent their returns in manually, on paper. The problem here is that when sending a paper return there is an increased likelihood that your return will go missing, have mistakes or other problems and you may not have time to fix the return before the 19th and the automatic fine.
You wouldn’t dream of purchasing something without a valid tax invoice or receipt, and yet many contractors risk fines with manual processes. This is silly since there is software like ours on the market which can make a submission within minutes of getting set up and provide you with a valuable receipt.
My overall impression is that the online services are finally stable (and have been for several months). HMRC are very quick to contact us to let us know when there are planned outages and unplanned outages tend to resolve themselves quickly. The verification service problem as far as I know is still outstanding, although I haven’t seen much media attention on this point.
Other relevant blog posts on this subject from Mike on Software
“A winning letter”: https://www.mikewilson.cc/2007/08/31/a-winning-letter/
“A rebuttal to ‘Spokesman’ from HM Revenue & Customs”: https://www.mikewilson.cc/2007/08/07/a-rebuttal-to-spokesman-from-hm-revenue-customs/
Software Products for New CIS
Status-Check (employment status software): www.status-check.co.uk