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HMRC internal manual

Construction Industry Scheme Reform Manual

The Scheme: primary legislation: section 62

This section explains how the deductions made from contract payments should be dealtwith

  • deductions must be paid over to HMRC: FA04/S62 (1)(a)
  • the deduction does not reduce the amount of the payment for income or corporation tax purposes: FA04/S62 (1)(b)

Where the subcontractor is not a company, the deductions will be treated

  • as income tax paid in respect of relevant profits: FA04/S62 (2), and
  • where the amounts deducted exceed the liability to income tax, any excess used to discharge Class 4 contributions due: FA04/S62 (2)

Where the subcontractor is a company sums will be treated as paid on account ofrelevant liabilities in accordance with regulations – FA04/S62 (3)(a) See SI2005/2045reg 56

  • this sum to be off-set against relevant liabilities in the year of assessment in which the deduction is made: FA04/S62 (3)(b)
  • if relevant liabilities are satisfied leaving an excess of deductions then remaining sums may be set against corporation tax: FA04/S62 (3)(c)
  • any surplus amounts can be repaid: FA04/S62 (3)(d)

The remaining sub-sections cover

  • a definition of ‘relevant liabilities’ as liabilities as an employer or contractor: FA04/S62 (4)
  • definition of certain terms used for the purposes of the section: FA04/S62 (5)
  • clarifies references to ‘regulations’: FA04/S62 (6)
  • allows the regulations to include supplementary, incidental or consequential provisions: FA04/S62 (7)