Construction Industry Scheme Operational Forum (CISOF) - Minutes

Tuesday 30 September 2008, New Nelson Room, New Wing, Somerset House, London

Attendees:

HMRC

Roy Massingale - [RM] (Chair)
Ray Bourley - [RB]
Ken Claydon - [KC]
Jeremy Croucher - [JC]
Peter Grattidge - [PG]
Dot Bartlett - [DB]
Terry Dummett - [TD]

Industry

Jim Etherton - [JE] BASDA
Liz Bridge - [LB] CC
George Northall - [GN] CBI
Sue Cave - [SC] FSB
Tim Cross - [TC] JTC
Eric Rolfe - [EC] JTC
Gordon Marjoram - [GM] FMB
Howard Royse - [HR] ICAEW
Stephen Burrell - [SB] CIOT
Elaine Gibson - [EG] (IPP)

Apologies

Suzanne Nichol
Maurice Denyer
Ken Tracey

1. Minutes of last meeting and action points

The minutes were agreed

Action point 1 - KC reported that there was plenty of guidance available to cover what happens to penalties once a company has notified HMRC that it has ceased. Action closed.

Action point 2 - The CIS helpline doesn't currently maintain a record of frequently asked questions. An impromptu one was undertaken at KC's request but revealed no surprises. Scope for discussion here with the helpline for an FAQ's register to be developed for the future. [New action point 1 - KC will take this forward]

Action point 3 - see agenda item 2e) below

Action point 4 - An update to the CIS website covering advice that Contractors re-verify when a delay in the issue of a form CIS316A is at point is to be published today. Apologies given for the delay - this due to a misunderstanding by the HMRC web publishers. Action closed.

Action point 5 - RB said that no records were kept of 'reasonable excuses' given in individual cases. However, DB had undertaken a sample during visits to Network offices. Common reasons were cashflow, illness, ignorance of the new scheme, agents, domestic problems, postage problems. Action closed.

Action point 6 - see agenda item 2d) below

Action point 7 - RM took forward anecdotal suggestion of delays in being able to get through to the CIS helpline to senior managers. There were some delays at the tax credits renewals time when staff were temporarily redeployed to cover what was perceived to be a more crucial area. However RM has stressed that the industry also relies on the helpline for its livelihood and cannot afford to have staff redeployed from it at any time. CIS is different to other contact centres/helplines. KC reported that everything was back to normal and in w/c 22nd September, the average response rate was 96 per cent in 20 seconds with 100 per cent of all calls answered. Action closed.

Action point 8 - KC reported that there had been a backlog of 720 stuck verification cases at the time of the last CIRIP meeting in July. However this had now fallen to 60, which is the usual weekly quota. All affected contractors had been contacted. New cases were identified automatically. Only affects online verification and is not a common problem. Action closed.

Action point 9 - KC said that It was possible (although very rare) for partners in a partnership to have different tax treatments. No further guidance needed. Action closed.

Action point 10 - covered by post-meeting note of 23 July (see page 8 of the CIRIP information pack for 30 September 2008). Action closed.

2. HMRC Issues

(a) future arrangements

  • RB said that Bob Cope had stepped down from CIRIP and ACCA had not as yet named a replacement. Bob had made a very valuable contribution to CIRIP over many years and his contribution would be missed.
  • Due to a refurbishment programme at Bush House, the next CIRIP meeting would be on Thursday 20 November in Room 73, 2nd Floor, New Wing, Somerset House. Members may need to wait in reception. And (regrettably) there will be no refreshments.
  • For the New Year onwards RB suggested that CIRIP meetings should be held on a quarterly basis. Industry side agreed. Dates would be notified in due course for 2009. In view of this, any particular industry issues/concerns in between meetings should be emailed to Jeremy Croucher.
  • RM suggested that as the implementation stage of CIS was over there should be a new name for the panel.

(b) CIS stats

  • RB apologised for the late arrival of CIRIP information packs. The statistical information had only arrived from our statisticians, who were under pressure in the run up to PBR, on the morning of 29 September.
  • There were some glitches in the stats provided, notably the graph on page 11 of the information packs - headed 'Penalty Appeals (to September)'. The figures shown in the graph were incorrect but HMRC will discuss with its statisticians and get this rectified for the next meeting.
  • RB said that the levels of returns and penalties appeared to have reached a settled level.
  • The May, June and July 2007 penalties issued in August 2008 (graph on page 13 and 14 of the packs) were due to late notifications by contractors who should have been in the scheme throughout.
  • LB has seen a case where tax has been accounted for and paid each month but returns have not been filed, resulting eventually not only in a lot of returns to complete but a lot of penalties for late filing. KC pointed out that HMRC did not know what CIS tax was coming in on a month-by-month basis due to the making of single tax payments. RB suggested that the UTRs of any known problem cases should be fed back for investigation as to what has happened.
  • DMB are now taking action to chase some of the contractors who continue to get penalties month-on-month.
  • GM wondered if there was any evidence to suggest improved compliance once a penalty was imposed. HR would like to see stats on the yield from penalties and how much HMRC is actually collecting. RB agreed to put penalties and in particular an update of the DMB action on the agenda for the next meeting.
  • LB raised concern over the very tight timeframe for completion of the monthly return. If there was evidence to suggest that the 15 per cent of the contractor population missing the filing date were only doing so by a small margin, was this not reason for considering an extension of the completion timeframe to (say) three weeks?
  • RB said that there was a regular pattern of returns coming in over the post-filing dates of each month, although it was difficult to know whether all those received at the end of the month related to that month. Online filers represented a very small percentage of late filers.

(c) TTQT

  • RB said that the September TTQT stats showed the failure rate at 28 per cent, the same as it had been for a number of months. There was a current backlog in cases awaiting review but steps were being taken to reduce this.
  • RB pointed out that TTQT stats were a snapshot of the position at a point in time showing the numbers which had been fully reviewed (automated and manually) and the proportion which had ultimately failed (taking into account successful appeals)
  • GN will provide details of a case that seems to have bypassed the automated process - one where TTQT resulted in a failure notice but, on appeal, no failures could be found on the CIS record.
  • SC expressed concern over what guidance was provided for helpline advisors where nothing seemed to be happening with a GPS application made.
  • SB expressed concern over what appeals guidance was given to local offices. HMRC said that generic guidance was provided but that ultimately it was for a local office to decide what is or is not a reasonable excuse in individual cases. There was no requirement for local offices to escalate cases to the Head Office CIS team.
  • Suggestion made that the website includes specific guidance on what to do when a payment can't be made (for example, because of cashflow problems). KC suggested that this guidance already existed on the Employers'/PAYE website. RM said that the broader issue of time to pay and recovery policy was outside the CIS team's remit. However, he would seek some clarification on the point from DMB and try to get a DMB representative to attend the next meeting to cover the issue.

(d) Scope

  • RB advised that little progress had been made.
  • The exclusion of carpet fitting was the subject of a 1981 Statement of Practice based on legal advice provided at the time. He had not yet been able to locate this legal advice. If it could not be located shortly, the next step would be to seek further advice from our solicitors.
  • HR asked what guidance there was about the CIS position of 'buy-to-let' investors. RB pointed out that the distinction for CIS had always been between passive investment, where the only expenditure was to maintain the fabric of the property - in which case the investor would need to be spending more that £1 million a year to be in CIS - and the developer who would demolish, or materially alter, the property who would be regarded as a mainstream contractor.

(e) Compliance

  • By way of some background to his new role, PG explained that compliance activity in the department is changing. This is mainly due to the number of people working in the department.
  • RISK will become more and more of a consideration in the future.
  • Currently compliance activity in construction impacts many areas. Typical:
    • Large Business Service (LBS) - who deal with the top 50 companies controlled by Client Relations Managers (CRMs)
    • Local Compliance - divided into customer groups of Large and Complex (some dealt with similarly by CRMs), Small and Medium, Cross Cutting groups (the bulk of CIS and Construction Industry Team (CIT) work, and Targeted Education, Enabling & Leverage (TEEL) teams (who will be dealing with straightforward cases)
    • Special Compliance Investigations (SCI) - high profile fraud cases.
  • What are we doing now to help our customers?
    • Relying on RISK to identify review cases
    • Looking to refine this by creating two specialist risk teams focusing on construction (centralised RISK teams prepare packs)
  • We want to focus on those who are non-compliant (not those who are)
  • Next major aim is for 'one-stop-shop' reviews.. These will be cross-cutting embracing CT, ITSA, VAT, CIS, PAYE etc.
  • Looking for elimination of duplication (all encompassing 'real time' visits).
  • Employment status needs more focus going forward.
  • Consistency with penalty regime (Powers review)
  • Staff reductions still needed, together with a reduction in the number of office locations
  • Published Departmental Services Objectives will apply concentrating on the reduction in the tax gap and the improvement of customer service.
  • Compliance statistics for PY and PY-1 show:
    • 2006-07
      • Compliance reviews concluded - 4,191
      • Cases where employment status incorrectly applied - 748
      • Yield from status reviews - £17,164,246
    • 2007-08
      • Compliance reviews concluded - 7,262
      • Cases where employment status incorrectly applied - 550
      • Yield from status reviews - £17,684,320
  • LB raised a concern that the industry does not seem to be using the ESI tool very much. [New Action Point 2 - JC to establish where we are with ESI and circulate to CIRIP]
  • TEEL service is currently available to offer services to new contractors (for example, on status considerations) [New Action Point 3 - PG will report at next meeting how TTEL access is obtained]
  • 'Open an early dialogue' is a current initiative. This is designed to reduce the burdens on business where a review is being conducted.
  • JTC could be a source to pursue here (ie provision of own RISK rules).
  • Addressing Action Point 3 (see agenda item (1) above), PG summarised that the thought process behind the action was to see if there were ways of following money through CIS and then using this information to profile cases to take up for compliance review. [New Action Point 4 - PG will prepare a more informed view on this for discussion at the next meeting]

3. Industry Issues

Rosa Tormo had emailed JC on 25 September expressing concern about another HMRC 'CIS' forum about which CIRIP had heard nothing.

RB advised that this was a three-series forum set up to look at employment and false self-employment, the final meeting of which had been held on 27 September. It was not a CIS forum. The meetings were fact-finding in nature designed to flesh out some of the detail and the nature of relationships/arrangements etc. CBI had been represented at the meetings.

CIRIP was the only CIS forum.

4. AOB

  • JE asked what had become of the CIRIP wish list for future enhancements to CIS. RM said that this would be put on the next agenda.
  • ER enquired as to the correct position with regard to verification numbers. He'll pass specific details to KC to pursue and advise.
  • SB asked if consideration could be given to the segregation of CIS and other remittances.
  • KC drew attention to the CIS factsheet series. These were introduced in the implementation period of the new scheme. They have not been either revised or reprinted but have been available since in PDF format. All of the issues contained are now addressed on dedicated pages on the CIS website so agreement sought to formally drop the factsheets. Agreed.
  • Next meeting - Thursday 20 November 2008 - 10.30 am - Room 73, 2nd Floor, New Wing, Somerset House. JC will circulate formal invites in due course. Items for the agenda under 'Industry Issues' need to be emailed to JC by close of business on Wednesday 12 November.