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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: construction industry scheme (CIS): scheme overview: CIS - from 6 April 2007 - tax treatment qualifying test

One of the tests a subcontractor must pass before being successfully registered for gross payment is the Compliance Test.

To satisfy the Compliance Test the subcontractor must have complied with his tax obligations.

The CIS System will carry out a Compliance Test whenever a subcontractor applies to be registered for gross payment. The compliance history of the subcontractor will be looked at for the 12 month period prior to the date of the application (The qualifying period). Only if the CIS System is satisfied that the subcontractor has complied with his payment and return obligations will the Compliance Test be met. This process is called the Tax Treatment Qualification Test (TTQT).

TTQT will then be carried out automatically every 12 months. A subcontractor who does not meet the requirements of the Compliance Test will have gross payment cancelled. If this happens the subcontractor will be sent a letter advising that gross payment will be withdrawn after 90 days. After 55 days all contractors for whom that subcontractor has worked in the current or preceding two tax years will also be notified of a change in tax treatment.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

The subcontractor can appeal against cancellation of gross payment within 30 days of the notification. The grounds for appeal are reasonable excuse. Reasonable excuse is explained in the CIS Reform Manual at CISR48000.