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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
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Supporting Guidance: employer compliance: guidance by subject: construction industry scheme: CIS - until 5 April 2007 - payments to a third party

COG909270 gives an overview of payments to a third party and explains what a debt factor is.

COG910060 provides guidance on when payments are made to a third party after 05-04-07.

When a subcontractor nominated a third party to receive payments prior to 06-04-07 the caseworker should

  • establish who the third party was.
  • establish whether the contractor inspected a CIS6 certificate for

    • the subcontractor
    • the nominee.

If the contractor inspected a CIS6 certificate for both the subcontractor and nominee the payment could be made gross.

If the subcontractor was a CIS5 or CIS5(Partner) certificate holder and used the Certifying Document method a deduction still had to be made from the payment unless the third party was a debt factor (see below).

In all other situations the contractor had to make a deduction from the payment.

Payments to Debt Factors

If the third party was a debt factor it is unlikely that they would have held a certificate. This is because it is unlikely that they would be carrying on a business in the UK that consisted of construction operations. If the contractor inspected a certificate for a debt factor the caseworker should

  • follow the guidance in the CIS Manual (CIS1411)

If the subcontractor was

  • a CIS5 or CIS5(Partner) certificate holder,
  • used the certifying document method and
  • the nominee was a debt factor

the subcontractor could

  • nominate the bank account operated for its debts by the factor and
  • specify that account in its certifying documents.

In this situation the contractor would make the payment gross even though the debt factor did not have a certificate.

If a deduction was made the contractor had to issue a CIS25 voucher to the subcontractor. A subcontractor who was certificated could make a claim for immediate repayment.

If an inaccuracy is discovered, where payment has been made to a third party prior to 06-04- 07, the caseworker should

If payments under CIS from 06-04-07 being made to a third party the caseworker should