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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: construction industry scheme (CIS): new schemes - previously pseudo schemes

Where a review is being undertaken and the CIS Caseworker identifies

  • a contractor who has not previously registered as a contractor on CISR and there is no PAYE scheme open
  • a contractor who has not previously registered as a contractor on CISR but there is an open PAYE scheme but the scheme is set up as type (P) PAYE only and should be type (P/SC) PAYE and CIS

the opening of the correct type PAYE scheme will automatically generate a CISR record for the contractor.

It is important that the CIS Caseworker arranges for the opening of a new PAYE scheme or arranges to amend an existing scheme incorrectly classified as type (P) only to type (P/SC) and understands the impact late registration has on the resultant failure to submit the contractor’s monthly CIS300 returns.

The failure to submit the CIS300 due to the late registration on CISR as a result of not having an open and correct type PAYE scheme will mean the contractor will incur late filing penalties for each late filed monthly return - see COG914000.

It is the responsibility of the CIS Caseworker to seek recovery of all late filing penalties arising prior to the new registration date.

To avoid any issue of system generated automatic late filing penalty notices the date of registration of a contractor who has so far failed to register must not be retrospective. 

Action by CIS Caseworker to open PAYE scheme

Contractor not previously registered on CIS and no PAYE scheme open

  • Confirm with the contractor that he is and will continue to make payments to subcontractors, and if yes, then advise the contractor that a PAYE scheme will be set up for the contractor. The start date will be the 6th of the current month you identify the failure.
  • Do not wait until your compliance check is completed before opening a PAYE scheme
  • Arrange to open the PAYE scheme by completing a scheme stencil (Word 33KB) and then email it to NIC&EO, Emp Office Compliance Mailbox (PT Operations NIC&EO) including ‘Scheme set up’ in the subject heading.
  • The Employer Office will set up the scheme on EBS and in turn EBS will open a CISR record for the contractor.

The CIS Caseworker should

  • calculate and recover the CIS deductions due up to the end of the last return period prior to the new registration
  • calculate and recover interest for all periods up to the end of the last tax year - see COG908170 
  • consider penalties under COG914000 onwards for all months where a CIS300 should have been submitted prior to the new registration, and
  • consider penalties in accordance with COG914045 and COG914050 for all years for which a form CIS36 should have been submitted.

In the event that a contract settlement cannot be agreed, the CIS Caseworker should consider recovery of related CIS liabilities, interest and all late filing penalties by formal determinations and formal penalty determinations - see COG914180.