CIS and a non-UK worker

Application of construction industry scheme on a foreign subcontractor

The taxpayer supplied and fitted wooden flooring sourced from a German company. The product was of such a high specification that a fitter travelled from Germany to the UK to undertake the work. The taxpayer paid for the labour and the fitter’s expenses.

HMRC carried out a construction industry scheme compliance check on the taxpayer and found that it had not subjected the fitter’s payments to the scheme. The explanation was that he was not a UK taxpayer and was the only subcontractor. HMRC decided the scheme should have been operated and eventually the taxpayer agreed it should have made deductions at 30% on the payments to the fitter.

However the taxpayer said it had a reasonable excuse because it had no reason to believe that a German subcontractor would fall within the construction industry scheme. It had...