Deductions: credit and repayment: repayments to non-residents
|CISR72600||Action guide contents|
There is no difference between the treatment of UK contractors and subcontractors and non-resident contractors and subcontractors.
The Construction Industry Scheme obliges contractors to make payments to subcontractors gross or under deduction, as advised by HMRC during the verification process, or as determined by the contractor where verification is not necessary, regardless of any liability of the subcontractor to UK taxes.
Any non-resident subcontractor who has been paid under deduction and believes they have no liability to UK taxes will have to claim repayment through their SA Processing Office.
Before repayment can be made you need to establish;
- that the subcontractor is exempt from UK taxes
- whether the subcontractor has PAYE/CIS liabilities to be met in their role as a contractor or employer
- that the CIS deductions for the payments concerned agree what is shown on the CIS system.
Where the above is confirmed and a claim is made by the non-resident subcontractor, you may make an In-Year repayment of the CIS deductions made following the action guide at CISR72650, although in these circumstances forms CIS40 and CIS41 should not be used.
Specialist PT is now responsible for CIS related matters for all current and new non-resident companies that are not liable to CT because they are not trading in the UK through a branch or agency.
Any non-resident companies seeking advice on CIS related issues should be advised to contact Specialist PT. The contact details are at CISR97040.
Non-residence and exemption from UK tax on income
The liability of non-resident subcontractors to UK taxes can involve complex and technical taxation issues relating to the following considerations
- non-residence in the UK for tax purposes
- the carrying on of business through a branch or agency in the UK
- the provisions of the relevant double taxation agreement.
The relevant double taxation agreement should be consulted and guidance about permanent establishments and how to identify them may be found in the Double Taxation Manual at DT1700 onwards.
In any case of doubt or difficulty you should seek advice from Specialist PT (See CISR97040).
Where a subcontractor is resident in the Republic of Ireland but is travelling daily to work in Northern Ireland, you should note that there are special provisions in the UK/Ireland treaty. These say that if the subcontractor works on a building site or on a contract within the UK for more than 6 months, a permanent establishment will exist, and the subcontractor is liable to UK taxes. Repayment in these cases can only be made when the UK liability to tax has been agreed and covered. In any case of doubt or difficulty you should seek advice from CAR (See CISR97040).
Liability as employer/contractor
A non-resident subcontractor may also act as an employer or contractor within the UK. They may have liabilities in this role to be set against any deductions suffered before any repayment can be made. You should ensure that there are no outstanding liabilities of this kind before agreeing to any repayment.
Note; that where the subcontractor is a non-resident company, and that they also act as a contractor/ employer in the UK, then their CIS deductions should firstly be offset against any PAYE/CIS liabilities in the same way as a UK Company.