Date of article: 28/06/2007
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Tax experts fear one in four subcontractors is facing higher deductions because of problems with the online CIS verification system.
CIS specialist Carolyn Walsh of Insite 123 said: "Far more subcontractors are coming back as unmatched than anticipated and I estimate the current failure rate to be around 25 per cent."
Subcontractors had been under the impression they need two bits of information from three of the following to be verified: name, National Insurance number and Unique Taxpayer Reference.
Subbies are now being turned down unless they have all three. And the database has also come under fire for rejecting subcontractors despite them having all the documentation.
Ms Walsh said: "I'm not sure if the goalposts has fallen down, but either way it is not only imposible to gain a successful match on any subcontractor who fails to supply a UTR and a NINO, but the database appears to be flawed.
"In one day last week I had unmatched responses on four guys for whom I had their NI NO on a Revenue document.
"If the verification system has fallen down completely it should be taken offline until the problem of genuine subcontractors being reported as not registered is resolved."
Subbies rejected by the system face an emergency tax rate of 30 per cent instead of the standard 20 per cent.
A spokeswoman for HM Revenue & Customs said: "We don't have seperate figures for the results of online verifications but our best estimate is that fewer than one in 10 of the total verifications we have given were 'unmatched'.
"Also there has been no change in either policy or practice in relation to National Insurance numbers. The CIS legislation requires that contractors should supply UTR and NINO, if they have one, for every subcontractor they need to verify. Our published guidance has always reflected that.
"Our discussions with industry representatives were about ensuring that trivial, obvious errors did not lead to unnecessary failures to match details presented against HMRC records.
"In those circumstances we said verification could be given provided at least two of the pieces of infornation supplied could be matched. There are some individuals who, for valid reasons, do not have a NINO. Where there is no NINo on our records we will match on the remaining two items."
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