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HMRC internal manual

Construction Industry Scheme Reform Manual

From
HM Revenue & Customs
Updated
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The Scheme: payments: nominees and debt factors

 

CISR15600 Action guide contents
   

 

Nominees

Occasionally, a subcontract arrangement may require that the contractor makes payments to a nominee of the subcontractor. CIS is extended to payments to nominees by FA04/S60(1). Where this applies the contractor must verify BOTH the subcontractor and the nominee before making payment. For payment to be made gross to the nominee, both the subcontractor and the nominee must be registered for gross payment.

If the subcontractor and the nominee are not both registered for gross payment, payment must be made under deduction at the rate that would apply if the payment is made direct to the subcontractor. This means that if the subcontractor is registered for payment under deduction, the standard rate of deduction must be applied to the payment being made to the nominee. If the subcontractor is not registered, or cannot be verified for any other reason, the payment to the nominee must be made under deduction at the higher rate –regardless of the nominee’s own payment status. The contractor must still make out, and issue to the subcontractor, a payment and deduction statement in the name of the subcontractor.

Where a subcontractor entitled to be paid gross suffers a deduction under this procedure, perhaps because the nominee is not registered for gross payment in their own right, the subcontractor may claim an immediate repayment and the claim should be dealt with following the guidance at CISR72090.

Debt Factors

A subcontractor may enter into a factoring agreement such that the factor is responsible for collecting the subcontractor’s debts. The factor recovers the debt from the payer (the contractor), retains a portion under the terms of the factoring agreement and pays the balance to the subcontractor. If a subcontractor assigns their right to receive payment to a debt factor, the contractor can make the payment as if it were being made direct to the subcontractor.

If we have told the contractor to pay the subcontractor gross, the payment to the debt factor should also be made gross.

If we have told the contractor to make a deduction from the payment to the subcontractor, the contractor must make the deduction from the payment to the debt factor.

The contractor must still make out and issue to the subcontractor, a payment and deduction statement in the name of the subcontractor.