Register and maintain subcontractor: the registration process: register company for gross payment
This action guide explains how to process a company application for Gross Payment registration made on form CIS305. 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’.
Note: to begin to process an application for gross payment status from a company you will need as a minimum the UTR and NINO in respect of each of the company director’s (boxes 30 and 36 and boxes 31 and 37 from the form CIS305), and each of the company shareholder’s (boxes 43 and 48 and boxes 44 and 49 from the form CIS305).If this information is not supplied, then you will need to register the company for net payment basis (if not already registered) following the instructions at CISR42660.
Step 1. To register a Company subcontractor for gross payment firstly carry out only Steps 1 to 9 of the Action Guide at CISR42660 – ‘Register Company for Payment Under Deduction’.
This takes you to the ‘Subsidiary Company’ window
Step 2. In the ‘Subsidiary Company’ window
- Check whether there are entries in Boxes 15 to 21 of form CIS305
- Go to Step 3
- Select [Next]
- Go to Step 4
Step 3. In the ‘Subsidiary’ window
- Select the checkbox alongside the question ‘Is the company wholly owned by a company(s) registered to be paid gross?’
- Enter the UTR of the shareholder company as shown at Box 16 (or 19) of form CIS305 in the field alongside ‘Shareholding Company UTR’
- Enter the percentage of shares owned by the shareholder company as shown at Box 18 (or 21) in the field alongside ‘Percentage of shares held by the company’
- Select [Find]
The CIS System will locate the shareholder company record and show its name and registration status alongside ‘Tax Treatment’.
- Select the [Add] button (the CIS System will refresh the window and show the additional shareholder in the list under ‘Parent Companies’)
- Repeat the last 4 steps for any additional parent company shown on the form CIS305
- Select [Next] when all parent companies have been entered
This will take you to the ‘Turnover‘ window. If any of the parent companies is not a CIS Gross status company or the overall shareholdings are not fully accounted for, you will need to enter details of the applicant company’s turnover, as described at step 4 below. If this section is ‘greyed out’ you should proceed to step 5) below to enter the bank account details.
Step 4. In the ‘Turnover Details’ panel of the ‘Turnover’ window
- Enter the number recorded at Box 22 of the form CIS305 in the ‘Maximum Number of Relevant Persons’ field
- Enter the amount recorded at Box 23A of the form CIS305 in the ‘Gross amount of payments’ field
- Enter the amount recorded at Box 23B of the form CIS305 in the ‘Cost of materials’ field
- Enter the amount recorded at Box 23C of the form CIS305 in the ‘Net Construction Turnover’ field
Note: The result of the test will be shown as ‘Passed’ or ‘Failed’ alongside ‘Turnover Test Passed’
Step 5. In the ‘Bank Account’ panel of the ‘Turnover’ window Enter
- the account name recorded at Box 24 of the form CIS305 in the ‘Account Name’ field
- the Sort Code recorded at Box 25 of the form CIS305 in the ‘Sort code’ field
- the account number recorded at Box 26 of the CIS305 in the ‘Account Number’ field
- Select the [Validate] button and the CIS System will show whether the bank account details are ‘Valid’ or ‘Invalid’
If you see ‘Valid’ alongside ‘Account Valid’ entry
- Go to Step 7
If you see ‘Invalid’ alongside ‘Account Valid’ and the message ‘The bank account is not registered in the UK’
- Go to Step 6
Step 6. Where the bank account details appear to be invalid
- Telephone the applicant to explore the reason 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”, 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.
- Go to Step 11
If you are satisfied that the bank account exists
- Select the ‘Override’ checkbox
- Select the dropdown arrow alongside the ‘Reason for Override’ field
- Select the appropriate description
- Go to Step 7
Step 7. If both the Turnover Test was passed and the bank account details are valid
- Select the [Next] button and the ‘Director Details’ window opens
- Go to Step 8
Step 8. In the ‘Director Details’ window
- Enter the number appearing in Box 27 of form CIS305 in the ‘Total Number of Directors’ field
- Enter the name, address and postcode details appearing in Box 28 (or 34) of form CIS305 in the relevant fields
- Enter the director’s National Insurance Number (NINO) appearing in Box 31 (or 37) of form CIS305 in the ‘NINO’ field
- Enter the director’s UTR appearing in Box 30 (or 36) of form CIS305 in the ‘UTR’ field
- Enter the date appearing in Box 29 (or 35) of form CIS305 in the ‘Date became a Director’ field
- Enter the PAYE reference(s) appearing in box 33 (or 39) if an ‘X’ has been entered in the ‘Yes’ fields.
- Select the [Add] button
- Repeat the above steps for each additional director named on the form CIS305 or supplementary sheet
- When you have entered all the directors’ details, select the [Next] button
This takes you to the ‘Shareholders’ Details’ window.
Step 9. In the ‘Shareholders’ Details’ window
- Enter the number appearing in Box 40 of form CIS305 in the ‘Total Number of ‘Shareholders’ field
- Enter the name, address and postcode details appearing in Boxes 41 (or 46) and 42 (or 47) of form CIS305 in the relevant fields
- Enter the Shareholders NINO from Box 44 (or 49) of the CIS305
- Enter the shareholder’s UTR appearing in Box 43 (or 48) of form CIS305 in the ‘UTR’ field
- Enter the PAYE reference(s) appearing in box 45 (or 50) if an ‘X’ has been entered in the ‘Yes’ fields.
- Select the [Add] button
- Repeat the above steps for each additional shareholder named on the form CIS305 or supplementary sheet
- When you have entered all the shareholders’ details, select the [Next] button
This takes you to the ‘Employer Obligations’ window.
Step 10. In the ‘Employer Obligations’ window
- If there is an ‘X’ in the ‘Yes’ box in Box 51 of form CIS305, select the ‘Yes’ radio button
- Enter each reference shown in Box 51 in the ‘AO Ref’ fields
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 the [Next] button
- This takes you to the ‘Declaration’ window.
Step 11. In the ‘Declaration’ window
- Select the checkbox at the top right-hand corner of the window
- Select the [OK] button
- Put the form CIS305 away in the folder CIS31, see CISR18020 regarding maintaining internal records.
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: The wording on the ‘Declaration’ window differs between applications for net payment status and applications for gross payment status. There will be no confirmation that registration has been completed.
In the unlikely event that the subcontractor refuses to make the declaration required that the 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 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 of the 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.
Step 12. If the company reported previous payments in Box 13 of form CIS305
- Note that you will get a warning – ‘Please remember to search for unmatched verifications’
- Select the [OK] button (warning message)
- Select [OK]
This takes you back to the ‘CIS Main menu’ window
- If you received a warning about Unmatched Verifications, go to CISR51680 for an Action Guide covering this subject.
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.