Register and maintain subcontractor: the registration process: register partnership for gross payment
This action guide deals with a partnership applying for ‘Gross Payment’ status. Before an application can be considered for ‘Gross Payment’ status the applicant must be registered. All successful registrations are automatically given ‘Payment under Deduction’ status whilst their application for ‘Gross payment’ status is pending; this is done to avoid a subcontractor having to suffer deductions under the‘higher rate’.
- To register a Partnership subcontractor for gross payment firstly carry out only Steps 1 to 13 of the Action Guide at CISR42640 – Register Partnership for Payment under Deduction.
You need to ensure that you hold sufficient information to complete the necessary windows:
Sections D, E, F, G and H of form CIS304 must be completed in full. If the form does not provide this information you should return the form CIS304 with a covering letter highlighting the sections that require further information. You should explain that you cannot process their application for Gross Payment status without this information, and in the meantime you should tell them that their application has been registered for‘Payment under Deduction’.
If the form has been fully completed you should proceed to input the information to runthe required tests.
- From the ’Trading details’ window select [Apply for Gross]
This will take you to the ‘Partnership Details’ window. The window will provide the details of all partners held on the Self-Assessment (SA) system. You need to check that the information shown corresponds with the information recorded from Box 21 ofform CIS304.
If you are satisfied that the applicant has provided the correct partner information you should check that all the partners are individuals. If the partnership is made up of atleast one company, trust or Unincorporated body you will need to mark the partnership asnon- standard. The turnover test will then have to be completed manually – see theAction Guide at CISR44620. See also the Action Guide at CISR42680 for more guidance on applications from Trusts.
- Where you are not satisfied that the applicant has provided the same information as is recorded on SA you should write to the applicant and explain that the partnership details held against their SA record is out of date and that they need to update this record before they can apply for gross tax treatment.
- You should select the [Cancel Gross] button and complete the declaration for Payment Under Deduction. The system will automatically issue CIS313 advising the applicant that they have been successfully registered for Payment under deduction.
- If the applicant has advised during registration that they had been paid by a Contractor prior to registration a prompt will be displayed reminding you to complete any unmatched verifications. If you do not have the verification numbers you should telephone the customer to obtain the information to allow verification to take place. See the Action Guide at CISR51620 for details regarding verification.
Where the information agrees select the [Next] button.
- This will take you to the ‘Turnover Details’ window. You need to input the following information:
* Gross amount of payments (exclusive of VAT) - box 33A * Cost of materials - box 33B * Maximum Number of partners in Partnership over the last 12 months - box 32
The system will automatically calculate the expected Net Construction Turnover and aPass or Fail will result. If the Net Turnover Figure provided does not agree with the figure provided you should check all figures input. The result should agree with that shown on form CIS304 and you should over type the Net Turnover Figure where necessary.
- If the turnover test fails you should continue to capture the bank account details. This is to ensure that if the Business Test fails as well the system will show both reasons for failure on the CIS308.
- Input the Bank account details as follows
* Account name - box 29 * Sort Code - box 30 * Account number - box 31
Select the [Validate] button
Where the bank account details appear to be invalid:
* Telephone the applicant to explore the reasons for the failure
- If the Bank account remains invalid or where the Turnover Test has failed, or both, then you should select [Next] and not the [Cancel Gross] button on this window, you will then be presented with a dialogue box which says “Press OK to cancel the application for gross and remain on net”, then select [OK] to confirm the declaration for Payment Under Deduction. The system will then automatically write to the customer (CIS308) advising that they are registered for Payment under Deduction but they have failed the application for gross payment status. The reasons for failure will be detailed on the letter.
Where a bank account is returned as invalid but you have good evidence to believe that the bank account is valid you can manually validate the bank account. To do this
* Select the ‘Override’ checkbox * Select the drop-down arrow alongside the ‘Reason for Override’ field * Select the appropriate description * Select the [Next] button
If the bank account is valid and the turnover test is passed the application for gross payment status can proceed by selecting on [Next].
- You will be taken to the ‘Employer Obligations’ window.
If there is an ‘X’ in the ‘Yes’ box at Box 27
* select the drop down box, and * enter yes.
Enter the partnership employer PAYE references as shown on form CIS304 plus any recorded on separate sheets.
Note it is not necessary to enter the references of any contractor schemes that the applicant has, as CIS Reform will automatically know these, so the PAYE references to be entered here are those that are strictly PAYE only.
* Select [Next]
- If there is an ‘X’ in the ‘No’ box at box 27 of form CIS304 select the drop down box and select ‘No’.
* Select [Next] * This takes you to the ‘Declaration’ window
- Select the box at the top right hand corner
- Select the [OK] button this will take you back to the CIS main menu.
You should check again that the declaration has been signed before selecting the confirmation box at the top right of the window. If the application is being made by paper, the application form must be signed by the subcontractor, it cannot be signed by a Tax adviser on the subcontractor’s behalf.
Note that the wording on the ‘Declaration’ window differs between applications for net payment status and applications for gross payment status.
In the unlikely event that the subcontractor refuses to make the declaration required thatthe information given above is correct, you will need to select [Cancel] on this window which will take you back to the CIS Main Menu, the subcontractor should be advised that they have not been registered, and that any payments made will be subject to a deduction.This deduction will be at the higher rate if the subcontractor has not already previously registered for net payment status (payment under deduction).
You will be presented with a dialog box advising that the system will run a TTQT(Compliance Test). Once complete the system will notify the applicant of the outcome ofthe gross payment application. The system will record if the application has been successful. Where the application has failed the system will record all the reasons for failure. The applicant will receive form CIS308 detailing all the reasons why the gross payment application has failed.
If the contact requires you to carry out further Registrations, then select the [New Customer] button, if however they do not then if you select the [End Contact] button this will take you back to the Identify Customer window. When selecting the [New Customer] button a message is displayed stating “Click on the [New Customer] button again if a new customer is to be retrieved within the same contact”, this message is merely to confirm that you wish to view another customers CIS record within the same contact. If you do not then you should select the [End Contact] button instead.