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HMRC internal manual

Construction Industry Scheme Reform Manual

Register and maintain subcontractor: gross payment or payment under deduction: finalise incomplete tax treatment - sole traders

CISR43000 Information contents
   

This action guide describes how to deal with a case where the system has been unable to complete the Tax Treatment Qualification Test (TTQT) for an individual. The system will present details of any completed TTQT results and will supply details of each outstanding incomplete test. The system will record a result of ‘Incomplete’.

Before using this action guide users must read CISR43070 and familiarise themselves with the information panel on TTQT. Where the subcontractor currently holds gross payment status which is being removed under FA04/s66(1) you must also firstly consider whether the subcontractor has a ‘reasonable excuse’ for the failures identified (see the guidance at CISR49030).

Where you are to finalise the ‘Incomplete’ or ‘unconfirmed’ TTQT result, follow the guidance below;

  • From the CIS Main menu select the type of Registration for which you wish to finalise the TTQT. For example, where the subcontractor acts both as a sole trader, and as a partner in a partnership select the box alongside one of these and then the ‘Manage TTQT’ function.
  • This will now take you to the ‘Tax Treatment Details’ window. Under the heading Tax Treatment Qualification Test History CISR will show you the results of where the TTQT is incomplete. Then select the [Finalise] button.
  • The TTQT Summary window will now display the test participants with incomplete results, this will be the sole trader applicant only.

In order to manually complete a TTQT it is necessary to first make the incomplete reason ‘Inactive’.

SA liability details not found

  • From ‘Incomplete TTQT Summary’ go to ‘Test Participants with Incomplete Results’. select the relevant participant.

This will take you to the ‘Participant Summary’ and will provide the ‘Result Reason Details’. You will need to note the participant’s UTR.

  • Go to [SA View Statements] Input participant’s UTR number. Select [View Statement] button.

The latest statement will then be displayed. You need to look at all liabilities that were due within the last 12 months so you may need to look at more than one statement. Do not consider any liabilities that fall outside of the 12-month qualifying period. You should make a note of the date the liability became due and the date the payment was made.

Use the table below to establish the test result.

All SA payments settled on time Pass
   
1 SA tax payment paid less than 28 days late Pass
1 SA tax payment paid more than 28 days late Fail
2 SA tax payments paid less than 28 days late Fail
1 SA payment unpaid (more than 28 days) Fail
No SA payments due Pass
SA non tax payments settled on time Pass
1 or more SA non-tax payments paid late Fail

SA return information not found

  • Obtain UTR from ‘Incomplete TTQT Summary’ window.
  • Go to [Maintain Return Summary].

This window will provide details of the latest return. You may need to look at previous returns. You need to look at all returns that were due or filed in the previous 12 months. To do this

  • Select the drop down box and choose the relevant year.
  • Record the necessary information and use the table below to establish a test result.
No SA return (s) due Pass
   
SA return(s) due but not received Fail
SA return(s) received by the due date Pass

Liability information for scheme not found

Where the subcontractor employs workers it is necessary to check that liabilities have been met in respect of Non-CIS schemes.

  • From [CIS Main Menu] make a note of all schemes registered to the subcontractor
  • You will need to check that all liabilities have been met by examining the data held on BROCS (for months up to 05/04/2013) and ETMP (for months from 06/04/2013).
  • Use the table below to establish the test result
No employer liabilities due Pass
   
Employer tax liabilities settled on time Pass
1 or more employer tax liabilities paid more than 14 days late Fail
3 (or less) employer tax liabilities paid less than 14 days late Pass
1 employer tax liability unpaid Fail
4 or more employer tax liabilities less than 14 days late Fail
P35 and P14s due and not received (for years up to and including 2012/13 only) Fail
No P35 and P14s due (for years up to and including 2012/13 only) Pass
P35 and P14s due and received on time (for years up to and including 2012/13 only) Pass
Class 1A return due and not received Fail
Class 1A due and received on time Pass
No Class 1A return due Pass

Historical UTR with obligations

This reason occurs where the system has located more than two individual SA records. The most likely reason is that the subcontractor has been made bankrupt. Alternatively one of the SA records may have been set up in error.

  • Obtain the UTR from ‘Incomplete TTQT Summary Window’.
  • Go to [SA View Statement], and
  • check liabilities on both UTRs.

In a bankruptcy case it is likely that payment dates will not have been met this will result in a TTQT failure. Refer to the tables above for further details.

Voluntary arrangement in place

Participant under enquiry

  • Obtain UTR from ‘Incomplete TTQT Summary Window’.
  • From [SA Case Summary] select [Compliance].

This will take you to ‘View Compliance Summary’.

  • Select the relevant year that is under enquiry.
  • Select [View].

This will now display the name of the Compliance Caseworker dealing with the enquiry.

  • Contact the Enquiry Caseworker to obtain details of the nature of the enquiry and consider the effect it has on TTQT result.
  • Refer any cases of difficulty to a Higher Officer/Senior Officer.

Updating TTQT Information

Once you have completed all the required checks you need to update the system and record your result. A result reason can be ‘Pass’, ‘Fail’ or ‘Incomplete’.

If any reason is recorded as ‘Fail’ the overall result of TTQT will be that the application for gross payment status fails.

Any reason shown as ‘Incomplete’ needs to manually checked and the outcome recorded before TTQT can be completed.

Any reason with an ‘Active’ status will be automatically printed onto the letter issued to the subcontractor (CIS308) advising them of the outcome of their gross payment application.

  • Select [Finalise TTQT]

From the ‘Participant Summary’ window

  • select the result reason that you have checked.

The result will show as ‘Incomplete’ and the status will be ‘Active’. You need to make the status ‘Inactive’. To do this

  • go to [Inactivate Reason].

This will change the active status from ‘Yes’ to ‘No’.

Where the manual checks pass the test requirements

  • Go to [New Reason]

This will take you to the ‘Add Reason’ window

  • Select ‘Pass Reason’ and go to the drop down box.
  • Select relevant reason from the list presented.
  • Select [OK]

This will take you to the ‘Participant Summary’ and will record the reason and show the ‘Type’ as ‘Pass’. The status will be ‘Active’.

When you are sure that all the information is correct

  • select [Confirm Result].

The status of the result will change to ‘Confirmed’.

Where the manual checks fail the test requirements

  • Go to [New Reason]

This will take you to the ‘Add Reason’ window.

  • Select ‘Fail Reason’ and go to the drop down box.
  • Select relevant reason from the list presented.
  • Select [OK]

This will return you to the ‘Participant Summary’ and will record the reason you have entered and show the ‘Type’ as ‘Fail’. The status will be ‘Active’.

When you are sure that all the information entered is correct

  • select [Confirm Result].

The status of the result will change to ‘Confirmed’.

Where the application is for initial CIS registration the system will issue form CIS313 to the subcontractor where result is a [Pass], and form CIS316A will be issued to the various contractors that have paid the subcontractor within the last 2 years advising them of the subcontractor’s payment status.

Where the application is for initial CIS registration and the confirmed result is a [Fail] then a CIS308 will be issued to the subcontractor outlining the reasons for failure, nothing will then be issued to the contractors if the subcontractor is already on net payment status. However, if the subcontractor is currently on gross payment status then the CIS316A will not be issued until 55 days after the TTQT is confirmed, to allow time for any appeal from the subcontractor to be made. The contractors will be told in this instance that the new payment status should be applied from a date which will be 90 days after the TTQT was confirmed.

Update Test

If you have to terminate the TTQT check before it is fully complete you can save any checks done by selecting the [Update Test] button.

This will ensure that work is saved and will enable you to complete the remainder of the test at a later stage.