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HMRC internal manual

Construction Industry Scheme Reform Manual

HM Revenue & Customs
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The Scheme: payments: small payments arrangement - examination of applications

CISR15600 Action guide contents

Once it is established that a contractor is eligible to apply for the arrangement, it is necessary to consider, in some detail, the internal administrative structure of the contractor before an agreement can be reached on precisely which payments can be covered by the arrangement and thereby taken outside the scope of CIS and those which will remain within the Scheme. While local Processing Offices are free to modify their approach to suit individual circumstances, negotiation of detailed arrangements for applying the arrangement should normally proceed on the following lines:

  • obtain a written description of the concern’s internal administrative arrangements for the placing and payment of small contracts for construction operations
  • agree with the contractor exactly which payments the arrangement will cover. A meeting with the contractor or their agent will often help
  • send a statement detailing the terms of the agreement reached and requesting written agreement of those terms together with the undertaking referred to below
  • request a written undertaking from the contractor that they will take steps to ensure that work which would normally form one contract is not artificially broken down into a number of smaller contracts, each under £1,000, to avoid applying CIS
  • specify the date from which the arrangement is to be applied
  • give warning that any abuse of the arrangement will lead you to withdraw approval for its operation
  • retain the correspondence detailing the agreement reached in accordance with departmental retention policy.

The action guide at CISR15610 in this section sets out these points.

It is important that contractors do not implement the arrangement until precise arrangements have been agreed with the Revenue. If, following the preliminary and detailed examination of an application it is found that the necessary conditions are not met, the applicant must be advised that the arrangement cannot apply.

If a concern is found to have introduced the arrangement before approval has been given or to have abused the arrangement after it has been authorised, a report enclosing the papers should be made to CIS Advisory Team (see CISR97030).

Small payments arrangement already agreed under old Scheme

Where you have already agreed prior to 6 April 2007 that a contractor may use this arrangement (SI1993/743 reg 20B, under the old Scheme), then, provided you have no reason to suspect that matters have changed, the arrangement may continue under SI2005/2045 reg 18. Existing agreements, in place as at 5 April 2007, do not have to be re-negotiated with HMRC.