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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): scheme overview: CIS - from 6 April 2007 - payments to a third party

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

COG909580 provides guidance on when payments are made to a third party up to 05-04-07.

When a subcontractor has nominated a third party to receive payments the caseworker should

  • establish who the third party is.

If the third party is someone other than a debt factor the caseworker should

  • establish whether the contractor has verified

    • the subcontractor
    • the nominee.

If the contractor has

  • verified the subcontractor and third party and
  • both are registered for gross payment

the payment can be made gross.

In all other situations the contractor must make a deduction from the payment at the rate applicable to the subcontractor and the contractor must provide the subcontractor with a pay statement. COG910050.

If the third party is a debt factor the contractor should make the payment as if it were being made direct to the subcontractor. For example if the subcontractor is

  • registered for gross payment the payment should be made gross
  • registered for payment under deduction the payment should be made after deduction
  • unmatched the payment should be made after deduction at the higher rate.

Whenever a deduction is made from the payment the contractor must issue the subcontractor with a pay statement. COG910050.

If an inaccuracy is discovered where payment has been made to a third party the caseworker should

If payments under CIS up to 05-04-07 were being made to a third party the caseworker should