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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): scheme overview: CIS - from 6 April 2007 - changes to a subcontractor's tax treatment

A subcontractor’s tax treatment can change for several reasons. For example

  • an unmatched subcontractor may become registered or be verified. The subcontractor may then become registered for payment under deduction or gross payment.
  • subcontractor who is registered for gross payment may fail the Compliance Test either as a result of TTQT or a review / intervention and become registered for payment under deduction.

Whenever a subcontractors tax treatment changes HMRC will issue a letter to each contractor for whom that subcontractor has worked in the current and preceding two tax years to notify them of the change in tax treatment.

If the change means the start of, or an increase in, deductions for the subcontractor the contractor will be given 30 days notice of the change.

If the change is to gross payment the contractor should make the change as soon as is practically possible.

When considering changes to subcontractors tax treatment the caseworker should:

  • check that the timing of payments has not been manipulated so that no deduction or the least amount of deduction is made.

If the caseworker suspects that the timing of payments has been manipulated the caseworker should

  • check any documentation relating to the timing of payments. For example tenders, contracts and
  • question the contractor to determine the reasons why the payment has been made at a different time to that agreed.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) COG909180(This content has been withheld because of exemptions in the Freedom of Information Act 2000)