Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
, see all updates

Supporting Guidance: employer compliance: guidance by subject: construction industry scheme (CIS): gross payment registration - compliance test for subcontractor

CISR43010 gives detailed information on how a subcontractor can apply to be registered for gross payment.

CISR43020 will advise you that three tests are required to be passed to provide a successful application.

These are:

  • Business Test
  • Turnover Test
  • Compliance Test

Once a subcontractor has been registered for gross payment there is an ongoing obligation as required by FA04/S64 on the subcontractor to maintain full compliance with all tax obligations. The CIS system runs scheduled reviews (scheduled TTQT) covering the immediate 12 months prior to the date of the scheduled review (the qualifying period as defined at Part 1 Sch 11 Para 14 FA04) on each subcontractor who holds Gross Payment Registration to check that the compliance test requirements are still being maintained and the subcontractor continues to pass the test.

Your role will be concerned with ensuring that during your check of the contractor that if the contractor operates as both a contractor and a subcontractor who holds registration for gross payment that the conditions of the compliance test are in fact being maintained. See COG909155 for guidance on compliance failures identified at the compliance check.

You should familiarise yourself with the requirements of the compliance test CISR46010 and whether any failure you identify should be treated as failing the test.

CISR46080 details what a schedule review TTQT can and cannot overlook in deciding if the registration needs to be withdrawn. These tolerances are defined by SI2005/2045 Reg 32.

These are reproduced here:

Failures you can overlook

  • Three late submissions of the contractor’s monthly return CIS300 - up to 28 days late.
  • Three late payments of CIS/PAYE deductions of £100 or more - up to 14 days late.
  • One late payment of Self Assessment tax of £100 or more - up to 28 days late.
  • Any employer’s end of year return P35 submitted late (up to and including 2012-13).
  • Any late payments of Corporation Tax of £100 or more - up to 28 days late, including where any shortfall in the payment has incurred an interest charge but no penalty.
  • Any late payment or outstanding interest charge for Corporation Tax or Self Assessment irrespective of the amount.
  • Any amount of £99.99 or less not paid by the due date (this was added by the amending regulations in SI 2008/1282).
  • Any Self Assessment return made late.
  • Any Corporation tax return (form CT600) made late.
  • Any failures classed as ‘minor and technical’ in respect of obligations preceding 6 April 2007 where these are still within the twelve month qualifying period.

What we cannot overlook

We cannot overlook the following failures involving obligations falling due in the qualifying period.

  • Four or more late submissions of the contractor’s monthly return CIS300 where they were less than 28 days late.
  • Any submission of the contractor’s monthly return made later than 28 days after the due date.
  • A contractor’s monthly return already due but remaining outstanding at the date of application.
  • Four or more late payments of CIS/PAYE deductions of £100 or more up to 14 days late.
  • Any payment of CIS/PAYE deductions of £100 or more made later than 14 days after the due date.
  • Any payment of CIS/PAYE deductions already due of £100 or more but remaining unpaid at the date of application.
  • Any payment of Class 1A NIC of £100 or more made later than 14 days after the due date of 19th July.
  • Two or more payments of SA tax of £100 or more paid late but less than 28 days after the due date.
  • Any payment of a penalty or surcharge of £100 or more made after the due date.
  • Any payment of Corporation tax of £100 or more made more than 28 days after the due date.
  • Any payment of SA tax already due of £100 or more but remaining unpaid at the date of application.
  • Any payment of Corporation tax already due of £100 or more but remaining unpaid at the date of application.
  • Any SA return due in the qualifying period but outstanding at the date of application.
  • Any Corporation Tax return (CT600) due in the qualifying period but outstanding at the date of application.
  • Any failure not classed as ‘minor and technical’ preceding 6 April 2007 but within the 12 months prior to the application.

Bear in mind that the failures mentioned above relate to obligations falling due according to CISR in the qualifying period. Outstanding obligations falling due prior to the start of the qualifying period cannot be taken into account directly.

If a failure is one that cannot be overlooked then you must take action in accordance with (COG910110).