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HMRC internal manual

Construction Industry Scheme Reform Manual

Register and maintain subcontractor: compliance test: companies

CISR46600 Action guide contents

To satisfy the compliance test a company applicant and its constituent directors (and beneficial shareholders where the company is ‘close’) must have done all the following on time in the 12 months up to the date of application, this applies even where the director or shareholder resigned or sold their shares at some time during the ‘qualifying period’.

  • sent in all returns due
  • complied with all requests for accounts or other relevant information
  • paid on time all tax including any interest or penalty, and also including all PAYE, NICs and CIS deductions due in the role of employer or contractor (Capital Gains Tax chargeable upon a company is not included here, although Capital Gains Tax chargeable upon any of the ‘Relevant Persons’ connected with the company is included). 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 obligations under the Taxes Acts
  • complied with any other obligations under the Companies Act 2006 and relevant provisions of the Treasury Order SI2009/1890 which made the appropriate consequential amendments.

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
CISR46080 Compliance Tolerance

Finally, there must be ‘reason to expect’ that the applicant company will continue to comply with tax obligations in future (see CISR46100 for more details on the ‘Reason to expect’ test).

Reasonable excuse

You may ignore certain failures to comply with the above conditions where

  • the company applicant had reasonable excuse for the failure to comply,


  • once the excuse ceased to apply, the company then complied with the obligation without unreasonable delay.

See CISR81020 for more information about what can be regarded as reasonable excuse.

Timely compliance

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 applicant fails the compliance test.

However, there are certain tolerances specified in the regulations whereby HMRC will overlook a compliance breach. There is more information about these tolerances at CISR46080.

See CISR18140 for information on companies involved in

  • Company Voluntary Arrangements
  • Informal arrangements

Section 64(5), FA2004

In addition to examining the compliance of the company in the qualifying period, FA04/S64(5), allows HMRC to examine the compliance of its principals.

If any of the following apply, you may examine the compliance of directors (and shareholders if the company is close) where;

  • a company is seeking registration for gross payment for the first time
  • there has been a change in the control of a company that is registered for gross payment and you wish to determine whether the new interest represents a compliance risk
  • cancellation of a company’s registration for gross payment is being considered under FA04/S66.

The application form for companies to apply for gross payment status (CIS305) now includes a reference to the fact that a direction under s64(5)/04 may be made.