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HMRC internal manual

Construction Industry Scheme Reform Manual

The Scheme: miscellaneous: cancellation of gross payment status - insolvency


CISR18600 Action guide contents

The commencement of insolvency proceedings does not, in itself, justify formal cancellation of gross payment status held by an individual or a company. The need to cancel such status must be judged according to

  • the change in the taxpayer’s circumstances leading to, or brought about by the insolvency proceedings
  • how far these changes create the conditions justifying cancellation.

Where you become aware that a subcontractor holding gross payment status has been made insolvent, you should run an “ad-hoc” TTQT. This will ascertain if a TTQT was run now whether CISR would still allow the subcontractor to continue with gross payment status. An “ad-hoc” TTQT is run by using the function “Manage TTQT”,but this function will not be available until October 2007.

Cessation of business

The most obvious change in circumstances that may arise from insolvency is the cessation of business. In this case cancellation of gross payment status can be justified under FA04/S66(1)(a) in that you would not now admit a gross payment application from this taxpayer. This is because the taxpayer no longer satisfies the qualifying condition that they (or the company, as the case may be) must be carrying on a business which includes the carrying out of construction operations or providing labour for such work.

Tax arrears and irregularities

Where the business does continue and HMRC arrears figure in the insolvency proceedings then this raises the question as to whether this feature, of itself, justifies cancellation of the gross payment status.

In these circumstances you should run the automated checks (TTQT) to determine whether or not gross payment status should be retained by the business.