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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: gross payment or payment under deduction: notification of refusal

CISR43600 Action guide contents
   

Applicants who fail in their gross payment status application are notified in writing on form CIS308 of the reasons why the application has failed. If an application fails because it is unable to meet the requirements of the ‘Turnover test’ or the ‘Business test’ a CIS308 will be issued detailing the reasons why the application has failed to meet the requirements of these two tests. The Compliance Test will only be run once an application has met the requirements of both the ‘Turnover test’ and the ‘Business Test’.

However, where the application for gross payment is from a company or a partner in a partnership, the CIS308 will detail only the failings of the company or of the partnership. It will not detail the failings of any individual director or shareholder or in the case of a partnership the failings of a particular partner. Instead a message which says the following will appear on the CIS308:

Company

'’For the company to be registered for gross payment, all directors and shareholders must have complied with their tax obligations. Unfortunately the company has failed this test, so we have to refuse gross payment status’’.

Partnership

'’For an individual to be registered for gross payment as a partner in a firm, all the partners in the partnership must have complied with their tax obligations. If one of the partners in the partnership fails the Compliance Test then unfortunately the partnership has failed this test, so we have to refuse gross payment status’’.

The reason for the CIS308 displaying this information only, is so that there is no disclosure regarding the failures of a particular director or shareholder or of another partner in a partnership to a third party without the express authority of the individual concerned. Once a CIS325 (director or shareholder) or a CIS324 (partner) has been completed by the individual then compliance failures made by them may then be disclosed as necessary.

However if you have already received the necessary authority on form CIS324 or CIS325 (as appropriate) before the ‘Unconfirmed’ TTQT is finalised, you may add the TTQT Test participants failures to the failures already identified for inclusion on the CIS308 in accordance with the authority now held.

The applicant has the right of appeal against the refusal to grant gross payment status. Any subsequent appeal hearing should deal with all the reasons for the application failing.

A subcontractor that has failed in their application for gross payment status is automatically granted net payment status.

Where a subcontractor’s initial application for gross tax treatment has failed they are free to re-apply for gross tax treatment at any point in time, however, they will still have to pass the business, turnover and compliance tests. Therefore as long as there are still compliance failures within the 12 months leading up to the fresh application, they will not be able to pass the compliance test.

If on the other hand, gross payment status has been removed, for example, following a Scheduled Review, the subcontractor is unable to re-apply for gross tax treatment until 12 months after the date net payment status commenced, this is known as an ‘exclusion period’ .