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HMRC internal manual

Construction Industry Scheme Reform Manual

Register and maintain subcontractor: gross payment or payment under deduction: sole trader becoming a partnership

CISR43600 Action guide contents

This is where a sole trader takes on a new person as a partner, without also taking on another business belonging to the new partner. The type of concern at the time of application is partnership. The new business should complete a form CIS304 (partnership application). The registering partner should sign the application.

Where the CIS Registration Team at NICEO receives an application involving a change in the type of concern where a previously registered sole trader has now formed a partnership, these will be referred (with a covering memo) to the CIS Centre, Newry, to take action on Self Assessment (SA) to ensure that the SA record is updated, see the Self Assessment Manual (SAM) at SAM101000. Once the SA record has been updated the CIS Centre, Newry should then continue to process the Registration application from the partnership for either net or gross payment status, and these should not be referred back to the CIS Registration Team at NICEO.

The type of concern at the time of the new application is a partnership. If the business is using the ‘Standard’ turnover test it will have to be able to show that it has earned ‘Net Construction Turnover’ of £30,000 multiplied by the number of partners, in the 12 months preceding the date of application. See CISR44160 for more information on the Standard Turnover Test. Alternatively if the business has earned ‘Net Construction Turnover’ of £200,000 or more in the 12 months preceding the date of application, the business will be able to meet the requirements of the ‘Alternative Turnover Test’. See CISR44170 for more information on the ‘Alternative Turnover Test’.

Business test

Most applications should be able to pass the Business Test. The partnership is able to use evidence that the sole trader undertook work within the United Kingdom Construction Industry to satisfy this part of the business test.

Compliance test

As the type of concern is that of partnership, all partners will have to meet the requirements of the compliance test before gross payment status is granted to those partners wishing to register for CIS.

Partnership becoming a sole trader(s)

Should you encounter the reverse situation, that is, a partnership is dissolved with one partner carrying on the business as a sole trader, or two partners carrying on two separate businesses as sole traders you may need to seek advice from the CIS Technical Team (see CISR97090) about the turnover being used by the sole trader(s) in registering for CIS.