CISR77620 - Deductions: Company CIS deductions claimed against P35 liability but payments recorded against another subcontractor’s record(s) - Action by the SA processing office

When the Employer section is reviewing the ‘Post Capture Work List’ and encounters a case where the deductions claimed on the company’s P35 cannot be reconciled with the payments recorded on CIS, they will take the actions outlined in CISR77610. Depending upon the response received from the company, the Employer section may need to refer the matter to the SA processing office for the sole-trader or partnership to take appropriate action.

The SA processing office should then take the matter forward by

• writing to the sole-trader or partner for more information, if necessary, and
• advising the Employer section on whether or not they may proceed to allow the company to claim its CIS deductions against the company’s P35 liability for the period concerned.

These cases have to be referred to the SA processing office for the sole-trader or partnership. This is because the company that submitted the form P35 is attempting to reduce its liability for PAYE/NIC by an amount that is currently recorded on CIS as being held for the credit of an SA liability for a sole-trader or partner(s) in a firm. Only the SA processing office is able to determine whether or not this is correct and take the appropriate action to rectify the matter. Advice on how to take the necessary action is set out below.

Company produces evidence in support of its claim

If the company was able to produce, to the Employer section, copies of bank statements or other good documentary evidence showing receipt of the payments corresponding to the sums shown on the disputed payment and deduction statements, you may accept the situation.

In all such cases, you should then

• check first that none of the disputed deductions recorded against the CIS record of the sole-trader or partner(s) have already been allowed against the SA liability of the sole-trader or any partners,
• check that the company has registered on CIS as a subcontractor. If they have not, ask the company’s COTAX processing office to issue form CIS305 to the company to enable registration to take place,
• notify the Employer section of how much of the deductions they may allow the company to claim against its form P35 for the year in question, and
• make an SA note of the

• • actions taken,
  • amount of the deductions allowed by the Employer section against the P35 liability for the company, and
  • year to which these deductions relate.

Important note: Failure to check that the deductions have not already been allowed against an SA liability in every case of this nature, may mean that credit for the disputed deductions is allowed inadvertently against the SA liability of the sole-trader or partner(s) in addition to being allowed against the company’s P35 liability.

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Deductions already set against SA liability

If you find that any of the deductions now being claimed against the company’s P35 liabilities have already been set against the SA liability of the sole-trader or partner(s), you should immediately

• refer the case to the RIS Manager for full risk assessment, including in your referral a full summary of the facts, and
• advise the Employer section of the situation and ask them to BF the case further pending the RIS Manager’s decision.

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Cases of difficulty referred to the SA processing office

A company may claim that the deductions it has set off against its P35 liability relate to payments made to the company despite the payment and deduction statements (and the contractor’s returns) being prepared by the contractor in the name and details of the sole-trader or partnership. If such a claim cannot be backed up by documentary evidence, the guidance above should be followed. However, the company may insist that, despite a lack of documentary evidence to support its claim, the payments were made to the company and that it therefore has a right to set the relevant deductions against its P35.

In cases of difficulty like this you should submit the facts to the CIS Technical Team (CISR97090) for further advice.