HMRC is writing to large insurance businesses, giving them 90 days to review their position to ensure they're compliant with Construction Industry Scheme (CIS) requirements. The letter warns recipients that if they don't take any action, this may lead to an enquiry.
The CIS is a tax regime that’s often overlooked due to a misconception that it only applies to construction businesses. The scheme can apply to non-construction businesses who spend more than £3 million on construction operations in any rolling one-year period, however. These are referred to as ‘deemed contractors’.
HMRC is focusing on insurance businesses that may commission construction work – for example on a policy holder’s property – either directly or through a loss adjuster, as they may be in the scope of the CIS.
HMRC says it's aware that some deemed contractors in the insurance sector haven’t registered for the CIS. It's also aware that others have registered but haven’t included payments to loss adjusters on their monthly CIS returns, which partly or wholly cover the cost of commissioning or undertaking construction work.
With significant penalties imposed for non-compliance, it’s important that businesses consider whether they have registration, filing and payment obligations under the CIS.
The receipt of correspondence from HMRC should always be taken seriously and it should be assumed that HMRC may have information which has led to a concern about the business’s tax position.
Insurance businesses in receipt of this letter need to undertake a review to establish whether they're a deemed contractor and, if so, from when. Any registration, filing and payment obligations will then need to be dealt with and HMRC is giving recipients 90 days to start operating the CIS.
If no action is taken, this may lead to an enquiry and could result in larger penalties being charged by HMRC for non-compliance.
Although the letter says that businesses whose CIS position is in order, or to whom CIS doesn't apply, need not do anything, such businesses should consider responding to explain why this is the case. This will mitigate the risk of HMRC opening an enquiry to check the position. It's important to carefully draft the wording of any response, however, so as not to prompt further concerns and it's recommended to seek specialist advice.
Our CIS specialists can support you with understanding and dealing with any CIS obligations that your business may have. This includes undertaking a review following the receipt of this letter, registrations with HMRC and support with ongoing monthly CIS obligations where applicable.
Where a response to HMRC is to be prepared, or a disclosure to HMRC is needed to rectify any irregularities, our specialists work closely with our tax dispute resolution team to achieve the best possible outcome for our clients.
For more insight and guidance, contact Julie Clarke, Mike Herdman or Louisa Beciri.
