Tax collected twice

During the years 2003 to 2005 our client paid several subcontractors without deducting the 18% tax. The payments are now being investigated. HMRC propose to levy a tax charge of 18% on the labour content of the payments.

All of the subcontractors are genuinely self employed have their own accountants and 'unique taxpayer references'. Our client's payments will therefore have been included in their accounts and taxed accordingly.

If HMRC now charge 18% on these payments that they have already taxed on the recipients the department will have taxed the payments twice.

Is there any defence against HMRC's unjust enrichment and will the subcontractors be entitled to a tax credit on the 18% tax charged on our client?

Readers' thoughts and comments are welcomed.

Query 17 189 — Subbed

Reply from Scorpio

Subbed will need to look very carefully at the circumstances where the subcontractors concerned...