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HMRC internal manual

Construction Industry Scheme Reform Manual

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HM Revenue & Customs
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Register and maintain subcontractor: the registration process: Foreign Nationals/Concerns applying for gross payment status

CISR42000  Information contents
   

Where you receive an application from an individual or concern that is applying for gross payment status and they are a foreign resident, or are a UK company with foreign directors or shareholders, then you should take the following action below. Note that applications from foreign companies are dealt with at Specialist PT, who already have their own arrangements in place.

Individuals and Partnerships

An appointment must be made at a UK venue for the applicant and amobile adviser will attend for HMRC. The applicant must produce

  • the documentation required to verify their identity (See CISR42150),
  • evidence to show that they pass the Business and Turnover Tests, and
  • evidence from their country of origin (translated into English) to prove that they have met their obligations in the originating country.

If the applicant is applying for gross payment status, you should;

  • photocopy all of the documents supplied by the applicant (handing the originals back).
  • send the CIS302 (or CIS304) and the photocopied documents to NICO for processing as normal.

As part of the processing net payment status will automatically be allocated initially to the subcontractor by NICO. NICO will also;

  • detach from the application the photocopied evidence produced by the applicant to prove their identity, and that their Compliance obligations were fulfilled in the country of origin and send these documents to Newry quoting the UTR for the applicant.

The Tax Treatment Qualification Test (TTQT) will run as normal, but as the applicant has previously been resident abroad TTQT will not be able to finalise the result as there will be ‘No History’ of the applicant’s Compliance. These cases will appear on the PEGA Worklist ‘SA TTQT Exception Handler’ and will be worked at Newry.

Newry should then;

  • locate the evidence passed to them by NICO as above
  • complete the Referral letter FN1 (this can be found within this manual at CISR96020 or on the CIS Intranet site)
  • send the FN1 to the Centre for the Exchange of Intelligence (CEI) to see whether the applicant has in fact complied with the tax obligations of the country of origin sending them copies of the evidence held
  • also in cases where foreign turnover has been used on the application, you should ask CEI to check that the level of turnover shown on the application is justified, and Newry will report to CEI the foreign turnover disclosed on the CIS302/CIS304.

Newry should be careful to disclose only turnover to CEI that relates to a period prior to the applicant entering the United Kingdom, and that the Turnover on the application was not in fact earned within the United Kingdom.

If evidence is received from CEI that the applicant has

  • disclosed false turnover and does not have the required level of turnover (where turnover arising outside of the UK has been used), or
  • has not met the compliance obligations of the originating country and therefore has not passed the Compliance Test

then the application for gross payment status should be refused. TTQT should then be finalised as a ‘Fail’ using the function ‘Manage TTQT’. The subcontractor will then have the right of appeal against this decision as normal.

It is anticipated that you should receive a response from CEI within a month of your request to them, to enable to you to finalise the TTQT as soon as possible. All requests to CEI for information should be made on form FN1 that can be found within this manual at CISR96020 or on the CIS Intranet site.

United Kingdom Companies with directors or shareholders who are foreign nationals

Where a United Kingdom registered company with a director or beneficial shareholder who are foreign nationals makes an application for gross payment status, the application will be dealt with in the normal manner. Once the company has been registered on CIS net payment status will be automatically allocated initially to the company subcontractor.

TTQT will then run and because there is no Compliance History for the foreign directors or beneficial shareholders this will result in an ‘Incomplete TTQT’. These cases will appear on the PEGA Worklist ‘CT TTQT Exception Handler’ and should be worked at Hull.

Hull should then;

  • issue CIS325’s to the directors and shareholders shown on the application form CIS305, and where the directors and shareholders are foreign nationals, ask them also to supply evidence to show that they have met their compliance obligations in their country of origin.

Once a response has been received from the director or shareholder to your request, Hull should;

complete the Referral letter FN2 (this can be found within this manual at CISR96020.

  • send the FN2 to the Centre for the Exchange of Intelligence (CEI) to see whether the foreign directors or beneficial shareholders have in fact complied with the tax obligations of the country of origin, sending them copies of the evidence received from the director or shareholder of the applicant company.

If evidence is received from CEI that the applicant has

  • has not met the compliance obligations of the originating country and therefore has not passed the Compliance Test

then the application for gross payment status for the company should be refused, and TTQT should then be finalised as a ‘Fail’ using the function ‘Manage TTQT’. The subcontractor will then have the right of appeal against this decision as normal.

It is anticipated that you should receive a response from CEI within a month of your request to them, to enable to you to finalise the TTQT as soon as possible