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HMRC internal manual

Construction Industry Scheme Reform Manual

HM Revenue & Customs
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Register and maintain subcontractor: gross payment or payment under deduction: changing a subcontractor's tax treatment from net to gross

CISR43000 Information contents

This action guide tells you how to change a subcontractor’s tax treatment from net to gross. If you receive a telephone request to change the tax treatment from net to gross the applicant should be referred to the Contact Centre. Alternatively you should issue form CIS302, CIS304 or CIS305 as applicable.

  • From CIS Main Menu
  • Select the relevant record from the list presented.
  • Select [Request New TT] from the menu.
  • This will take you to the ‘Request Change of Tax Treatment’ window. The current tax treatment will be displayed.
  • Select [Change to Gross] button.

This will take you to the ‘Turnover Test/Business Test’ Window’.

See the following Action Guides for more information on how to complete the statutory tests for gross payment status

CISR42630 Register sole trader for gross payment
CISR42650 Register partnership for gross payment
CISR42670 Register Company for gross payment
CISR42710 Register unincorporated body for gross payment
CISR42690 Register trust for gross payment
  • Complete the Turnover Test Details and Business Test Details and select [Next].

Please note you will not receive confirmation messages on completion of each section. You will need to navigate back through the screens to correct an error.

This will take you to the ‘Employment History’ window.

  • Answer the employment question by selecting the relevant radio button.

If the ‘No’ button has been selected you must complete the ‘Reasons for Non-Employment’. Select a reason from the drop down box. If the reason does not appear in the list select [Other]. This will allow you to enter the reason in free format. Input the relevant ‘From’ and ‘To’ dates in the boxes presented to you.

  • Go to [Next]
  • Complete the ‘Employer Obligations’ window. If the subcontractor is an employer select the ‘Yes’ radio button. If not, select the ‘No’ radio button. You will need to input the Accounts Office reference number for all schemes held by the subcontractor.
  • Select [Next]

This will take you to the mandatory declaration window.

  • Select the box confirming the declaration.
  • Select [OK]

You will be taken back to the main menu - there is no confirmation message.

The system will now automatically run TTQT. The subcontractor will be advised of the outcome of TTQT and will be notified as to whether gross payment status has been granted or not. If it has not been granted the subcontractor will be notified of the reasons why their application for gross payment status has failed. The subcontractor will have the right of appeal against failure to grant gross payment status.

The system will not allow you to proceed with an application to change a subcontractor’s tax treatment from net to gross in the following circumstances

There is an outstanding or incomplete TTQT already being dealt with.

The system will update the contact history to indicate that ‘The subcontractor’s request was not actioned due to an Outstanding or Incomplete Tax Treatment Qualification Test’. The system will automatically set the outstanding TTQT request at a higher priority in order that it is completed as soon as possible. Where an error message is displayed to you saying that TTQT was in the process of being run, you should select the [Cancel] button which will take you back to the CIS Main Menu.

The application for gross payment falls within an ‘exclusion period’.

On selecting the [Apply for gross] button a prompt will appear advising that the subcontractor is not eligible to apply for gross tax treatment. An ‘exclusion period’ will begin on the day that gross payment status was removed, and will continue for a twelve month period from this date. The date the ‘exclusion period’ ends will be shown;

  • advise the subcontractor of the earliest date when they will be able to make an application for gross payment status

There is an outstanding open subcontractor appeal against the refusal to grant gross payment status.

The system will not allow you to process a further application for gross payment status while there is an outstanding appeal. The subcontractor can choose to withdraw their appeal and maintain net payment status.

Changing a Subcontractor’s Tax treatment from net to gross because of an incorrect Tax Treatment Qualification Test (TTQT) result

You will need to be in the Compliance Manager or Process Manager roles within CIS;

  • From [CIS Main Menu] select the relevant subcontractor registration.
  • From [Menu] select ‘Change TT’.

This will take you to the ‘Change Subcontractors Tax Treatment’ window and will show the current tax treatment at the top of the window.

  • Under the title bar called ‘Change Tax Treatment to Gross’ use the drop down menu alongside ‘Reason for Change’ to make the selection that matches the circumstances of the particular case. The available options are:
  1. Upheld appeal
  2. False registration information
  3. Auth - Processing manager
  4. Auth - Compliance manager
  5. Auth - Central Compliance
  6. Auth - Civil Investigation
  • Select either ‘Auth - Processing manager’ or ‘Auth - Compliance manager’ from the drop-down menu.

The next scheduled review date will be set automatically and will be 12 months from today’s date.

  • Select [Change to Gross]

The payment status for the subcontractor will now be changed to gross effective immediately, and the contractors that the subcontractor is associated with will be notified of the change of tax treatment by the issue of letters CIS316 (the ‘contact history’ note of the issue of the CIS316 will only appear on the contractor record, and will not appear on the ‘contact history’ for the subcontractor).