This campaign, part of a broader initiative that includes targeting self-assessment discrepancies and specific groups like crypto-asset owners and pet breeders, is aimed at correcting potential errors in CIS tax deductions. Contractors receiving these letters are advised to verify their subcontractors’ CIS status, as HMRC’s records indicate that some deductions have been incorrectly applied.

Contractors have 45 days from the receipt of the letter to verify the status of their subcontractors. This can be done using the free CIS online service on the gov.uk website or through commercial software, the latter being mandatory for those with more than 50 subcontractors. The verification process should include checking all new subcontractors before payment, as well as re-verifying subcontractors not included in a CIS return in the past 12 months, to ensure the correct deductions are applied.

Failure to comply with these instructions could result in a compliance check. If errors are discovered during such a check, any disclosures made by the contractor will be considered prompted, potentially leading to higher penalties.

While these nudge letters are not formal statutory inquiries, they do serve as a significant reminder of the heightened scrutiny HMRC is applying to the construction industry. Contractors have 45 days from receiving the letter to take corrective action.