Change of deduction rate to 20 per cent
Where this is likely to happen, HMRC advises the following points should be observed:
- where subcontractors are to be paid net, the rate of deduction depends on the date of payment. The standard rate of deduction for payments made on or after April 6 2007 is 20 per cent
- where an invoice, to be paid after April 5, is processed on a contractor's accounting system on or before that date, HMRC would normally expect the new rate to be applied
- however we recognise that in many cases, the system will be unable to pick up the new rate in these circumstances. Where this happens, HMRC would not expect the contractor to reprocess the payment after April 5 but would expect the correct deduction rate to be applied as soon as the system allows.
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.
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