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HMRC internal manual

Construction Industry Scheme Reform Manual

Register and maintain subcontractor: compliance test: making a S64(5) direction

CISR46600 Action guide contents

The legislation allows you to make a FA04/S64(5) direction when

  • a company applicant seeks registration for gross payment
  • there has been a change in the control of a company that is registered for gross payment within the terms of FA04/S65
  • cancellation of a company’s registration for gross payment is being considered under FA04/S66.

The direction allows you to ‘look through’ the company seeking registration (or whose status is being reviewed) at the compliance history of any or all of the directors of the company. In the case of a close company this applies to all beneficial shareholders as well. 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.

This does not mean you should always make such a direction. As a broad rule you might make a FA04/S64(5) direction where you have any doubts about HMRC’s entitlement to expect future compliance based on the history of any of the directors. The following are situations where you should make a direction

  • all new companies.
  • an application is being made for gross payment status
  • there is a major change of management or control of a company shortly before registration is sought or whilst the application is being considered.

You should pay particular attention to the tax affairs of any new director or beneficial shareholder (where the company is close). (It is possible that those with a poor compliance record may attempt to obtain gross payment status by acquiring a company with a satisfactory history.)

In cases where there has been a change of control of the company and the new director’s/beneficial shareholder’s compliance record gives you cause for concern, refer the file to your regional contact of the CIS Technical team (see the CIS Intranet), with a brief report before making a FA04/S64(5) direction.

There is an action guide (CISR46610) associated with this document to explain how to make a FA04/S64(5) direction. Once the FA04/S64(5) direction has been made, you can refuse gross payment status on the individual compliance history of any of the company’s directors (or if a close company, any of the beneficial shareholders). Where any one person fails the compliance test, you should not register the company for gross payment status.

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