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HMRC internal manual

Construction Industry Scheme Reform Manual

HM Revenue & Customs
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CISR43600 Action guide contents

The Tax Treatment Qualification Test (TTQT) is an automated process that checks the compliance history of an applicant subcontractor applying for gross payment status within the ‘‘qualifying period’’ (twelve months) prior to the date the TTQT is run. TTQT will also be run annually for all subcontractors holding gross payment, this process is known as the Scheduled (or Ongoing) Review (see further below)

TTQT will check other computer systems such as Self Assessment (SA) and Corporation Tax (COTAX) to check that tax returns and payments have been made on time. Where the subcontractor also acts as an contractor or employer, TTQT will also check that all tax / NICs deducted from their own subcontractors and employees has also been paid to HMRC on time, and finally TTQT will also look to see if the subcontractor has filed all their monthly contractor returns (CIS300) on time.

TTQT will look at each ‘‘participant’’ connected with the application. So for a sole trader there will only be one participant, for a partnership there will be more than one participant, and for a company there could be one or more participants including the directors or shareholders in the company. For a company, the compliance of the directors or shareholders is only checked at the initial application for gross payment status and not annually thereafter.

TTQT will also only look at payments and obligations that have become due during the ‘‘qualifying period’’, any obligation that has not yet become due or that fell due before the start date of the ‘qualifying period’ will be ignored for the purposes of the test.

From 27 October 2008, TTQT also automatically applies a de-minimis limit of £99.99 against any liability either paid late or still outstanding within the ‘qualifying period’. This limit is applied against any or all of the following payments:

* Income Tax
* Class 1, 1A, or Class 4 National Insurance contributions
* Corporation Tax
* Any penalty or surcharge
* Payments due under PAYE in respect TAX/NIC/CIS

This de minimis limit can be applied any number of times against each of the above obligations, and where TTQT now finds any liability that is £99.99 or less instead of failing TTQT, this obligation will now pass.

In addition, from 23 November 2009 any failures in respect of late payment of interest charges or outstanding interest charges for both Corporation Tax and Self Assessment will also be ignored for the purposes of TTQT.

Where each participant has met all their taxation obligations on time, TTQT will score a ‘‘Pass’’ and gross payment status can be allocated to (or retained by) the subcontractor. Where the applicant or a participant has not met one or more of their tax obligations TTQT will score the application as a ‘‘Fail’’, and an ‘Unconfirmed’ TTQT entry will be generated on to the following work lists;

Type of concern Name of Worklist Worked by
Sole Traders Complete SA TTQT Manually CIS Centre, Newry
Partners in a partnership Complete SA TTQT Manually CIS Centre, Newry
Companies Complete CT TTQT Manually CT CIS Centre, Hull

Scheduled (Ongoing) Review

From October 2007 TTQT also runs annually against those subcontractors who already hold gross payment status on CIS, this process is known as the ‘‘Scheduled Review’’.

Before a Scheduled review TTQT can be finalised as a ‘fail’ for a subcontractor who already holds gross payment status you will need to ascertain from the subcontractor the reasons why the failure(s) identified occurred. This is so that you can establish whether or not the subcontractor had a ‘reasonable excuse’ for the failure(s) which will allow you to decide whether or not gross payment status should be withdrawn from them, see CISR49000 for more guidance about this.