Register and maintain subcontractor: compliance test: sole traders
|CISR46600||Action guide contents|
To satisfy the compliance test, sole trader applicants must have done all the following during the 12 months to the date of application (the qualifying period)
- sent in any SA return due within that period
- complied with all requests for accounts or other relevant information
- paid on time all tax and Class 4 NICs including any interest, penalty or surcharge and also including all PAYE and CIS deductions in the role of employer/contractor. Any obligation paid late or still outstanding that is £99.99 or less under any of these categories, and any interest in respect of Corporation Tax or Self Assessment paid late or still outstanding (irrespective of the amount), during the ‘qualifying period’ will be treated as meeting the compliance test.
- complied with all other relevant obligations under TMA70, ICTA88, and FA04.
Paragraphs 4(1)-(5), Part 1, Schedule 11, FA2004, taken together with Regulations 33 - 36 SI2005/2045, require that applicants must show that throughout the 12-month qualifying period
- they complied with their tax obligations in the UK or elsewhere
- had no obligations because they were unemployed
- had no obligations because they were in full time education
You need to be confident that you know what the subcontractor has been doing in the 12 months to the date of application. You may need to make enquiries about this where there seem to be gaps in the subcontractor’s history.
In addition, where a subcontractor had control of a company in the 12 month qualifying period, Paragraph 4(2), Part 1, Schedule 11, FA2004 requires that the company must have complied with its tax obligations during that period.
For further detailed information regarding the failures that may or may not be accepted for the purposes of the compliance test see;
|CISR46060||Main reasons for failure|
Finally, there must be ‘reason to expect’ that the applicant will continue to comply with tax obligations. (See CISR46100 for more details on the ‘Reason to expect test’).
You may ignore certain failures to comply with the above conditions where
- the applicant had reasonable excuse for the failure to comply,
- once the excuse ceased to apply, the applicant then complied with the obligation without unreasonable delay.
See CISR81020 for more information about what can be regarded as reasonable excuse.
The legal requirement is not merely that the applicant must have fulfilled tax obligations arising in the 12 month qualifying period preceding the date of application. Those obligations must, in addition, have been fulfilled within the time allowed in law else this requirement is not satisfied and the application fails the compliance test.
However, there are certain tolerances specified in the regulations whereby HMRC will overlook a compliance breach. See CISR46080 for more information about these tolerances.
See CISR18140 for information on subcontractors with
- Voluntary arrangements
- Informal arrangements