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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 - Companies, Unincorporated bodies and Trusts

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). The system will record a result of ‘Incomplete’ and will provide specific reasons for the automated test not being completed.

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 company, 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 showing you a list of all the test participants with incomplete results (the directors and shareholders of the company will be shown as participants only for initial registration for CIS). This window also gives you the option of adding a participant where for example, a new director or shareholder has joined the company but the new director or shareholder has not yet been tested. Where this is necessary select the [Add Participant] button and enter details of the new director or shareholder as required.

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

Corporation Tax Information for taxpayer not found

  • Obtain reference number from ‘Incomplete TTQT Summary’ window.
  • Go to [CT View]
  • Select [View Taxpayer]
  • Enter Company reference/UTR
  • Select [View Company details]
  • Select [Display Return details]
  • [Sel List] will show details of the returns received.
  • View payment and postings details
  • Use [Sel List] to select the particular account you wish to view.

Record the necessary information and use the table below to establish a test result.

CT tax paid less than 28 days late Pass
CT tax paid more than 28 days late Fail
More than 1 CT tax instalment unpaid Fail
1 or more CT non-tax charges paid late Fail
CT return(s) due and not received Fail

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

Participant under enquiry

  • Go to ‘Incomplete TTQT Summary’ window.
  • Obtain details of the relevant participant that is under enquiry.
  • If the participant under enquiry is a director make a note of the UTR.
  • Go to [SA View Statement] and select [Compliance]. This will take you to the ‘View compliance summary’.
  • Select the relevant year that is under enquiry.
  • Select [View]. This will 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 if has on the TTQT result. Refer any cases of difficulty to a Higher Officer/Senior Officer.
  • If the Company is under enquiry note the reference number.
  • Contact the Compliance Officer dealing with the enquiry to establish the effect on TTQT.

Making a S64(5) direction

In addition to these checks, you might consider checks on all the directors of a company and in the case of a close company, all the beneficial shareholders under FA04/S64(5). You can invoke a direction whenever you feel it would be necessary and you should certainly consider doing so where there has been a change in control of the company in the period leading up to the date of application.

Further information on making a direction is at CISR46110 and the action guide is at CISR46610.

Discovery assessment/determination found

  • Take action as described above under Participant under Enquiry.

Voluntary arrangement in place

Multiple non-tax charges of the same type of duty

If there is more than 1 non-tax charge of the same type, (for example a penalty) then TTQT is unable to establish whether payments have been made on time.

You will need to go into ‘COTAX’ and establish if the penalties were paid on time.

Adjustment does not match to charge

Where any accounting period being assessed as part of the TTQT qualifying period contains an ‘adjustment’ that cannot be related to a charge the test will provide an ‘Incomplete’ response. TTQT works out whether the obligations for an accounting period have been met by adding up all the debits and offsets any credits and adjustments.

As part of the automatic process TTQT will ensure that any adjustments made in the accounting period have a matching debit/credit. If a matching debit/credit cannot be found then TTQT will treat the situation as ‘Incomplete’.

You should examine CT charges, reliefs and offsets to decide whether the company has met its obligations for this period. Consult you local CT specialist in cases of difficulty.

Non standard company structure

A non-standard company structure is one where a relevant person is not an individual. You need to look into the company to establish if you are satisfied with the general compliance of the company.

If you are then you should

  • amend the reason type to ‘Pass’.

If you are not satisfied with the general compliance of the company you should

  • refer the case to the CIS Functional Lead Team with a detailed submission for advice.

Unincorporated body found

Where the subcontractor is a Joint Venture and the TTQT is either at initial registration or where the Joint Venture has asked for a change of tax treatment, then these cases should be dealt with as at CISR42100. If however the TTQT is a Scheduled Review then these may be worked as at CISR49070.

Occasionally a club or association may act in the role of subcontractor. Such cases should be sent to the CIS Advisory Team (See CISR97030) for advice.

Trust is present

Such cases should be sent to the CIS Advisory Team (See CISR97030) for advice.

SA return/liability information not found (for a shareholder in a close company)

Where TTQT has not been able to find an SA record in respect of a shareholder named on the initial company application (CIS305) for a “close” company you will need to take the following action.

An SA record for a company shareholder is only required (unless there are other reasons present) where a higher rate liability is established in respect of the company dividends they are receiving.

  • Use the tracing facilities within the PAYE Service and TBS to establish if there are any HMRC records for the shareholder.

Where no records are found or the records found indicate that an SA record is not required, you may assume that there is no higher rate liability in respect of the company dividends, and that there are therefore no failures in respect of that shareholder.

  • Record the result below to establish a test result.
No SA return (s) due Pass

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 be 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 company advising of the outcome of the request for gross payment status.

  • 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

  • Select [Inactivate Reason]. This will change the active status from ‘Yes’ to ‘No’.

Where the manual check has passed 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 the 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 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 the 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 new 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 company outlining the reasons for failure, this will outline the failure(s) of the company only, but will not include the failures of the directors or shareholders unless their authority to disclose this information has been received on form CIS325, if you have already received this you will be able to add these failures as a new failure reason before finalising the TTQT (see above).

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 finalised, to allow time for any appeal from the subcontractor to be made. The contractors will be told by this notice 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 TTQT check before it is fully complete you can save any checks already completed by selecting the [Update Test] button. This will ensure that work saved will enable you to complete the remainder of the test at a later stage.