Where this is likely to happen, HMRC advises the following points should be observed:
Where a contractor’s accounting system has applied the old rate of 18 per cent to all or part of a subcontractor’s payment made after April 5 because it was unable to pick up the new rate, the contractor should show the amount of payment and the actual deduction that was made on the monthly return for the month in which the payment was made.
Where this has happened, HMRC will not usually regard such action as a compliance failure by the contractor. However, HMRC would not expect to see such under-deductions beyond the return for the month ended June 5 2007, unless there were exceptional circumstances.
Further information
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Susie Hughes
The Editor © Hardhatter 2007