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HMRC internal manual

Construction Industry Scheme Reform Manual

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HM Revenue & Customs
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Deductions: SA Subcontractors: Credit arising to a bankrupt

CISR75000 Information contents
   

This action guide explains how to deal with credit for CIS deductions arising to a bankrupt. It is arranged in four parts as follows:-

Deductions made in the period

  1. 6 April to the date of the bankruptcy order
  2. from the date of the bankruptcy order to the following 5 April. (Existing trade continues)
  3. from the date of the bankruptcy order to the following 5 April. (New trade commences)
  4. in a tax year following that in which the bankruptcy order is made.

Note; where the claim for the CIS deductions has been made as part of a Self-Assessment return, you cannot ask for Payment and Deduction statements (PDS’s) or other evidence to back up the claim that has been made on the return. Any such request for this type of evidence will prejudice any potential S9A Enquiry into that return.

A. Deduction made in the period 6 April to date of bankruptcy order

  1. First set off confirmed deductions against any tax and Class 4 liabilities provable in the bankruptcy.
  2. If, following step 1), some credit remains unused set it against any other provable tax debts.
  3. If, following step 2), further credit remains unused write to the Enforcement Insolvency Section asking them to check whether any other government department has a claim against the bankrupt and if so, effect a set-off.
  4. If, after carrying out the above steps as appropriate, there is any unused credit for deductions made in this period, it should be repaid to the Trustee.
  5. Record the details in the papers by obtaining a screen print of the relevant subcontractors’ ‘Payment Details’ window which can be obtained from the ‘View CIS Customer’ function. You should also note the credit/repayment details on the relevant PDS. This is to ensure that any later claim does not result in creditor repayment where this has already been given.

B. Deduction made in period from date of bankruptcy order to the following 5 April. (Existing trade continues)

  1. Repay the confirmed deductions to the Trustee.
  2. Record the details in the papers by obtaining a screen print of the relevant subcontractors’ ‘Payment Details’ window which can be obtained from the ‘View CIS Customer’ function. You should also note the credit/repayment details on the relevant PDS. This is to ensure that any later claim does not result in creditor repayment where this has already been given.

C. Deduction made in period from the date of bankruptcy order to the following 5 April. (New trade commences)

  1. Allocate the credit against liabilities arising from the new trade in the normal way. You will normally become aware that credit arises in respect of a new trade commencing in this period when the bankrupt submits their SA return.
  2. If a repayment arises at a time before the subcontractor is released from bankruptcy, you should write to the Trustee asking whether they wish to claim the repayment, or, are content for the repayment to be made to the subcontractor
  3. Make the repayment in accordance with the Trustee’s wishes.
  4. Record the details in the papers by obtaining a screen print of the relevant subcontractors’ ‘Payment Details’ window which can be obtained from the ‘View CIS Customer’ function. You should also note the credit/repayment details on the relevant PDS. This is to ensure that any later claim does not result in creditor repayment where this has already been given.

D. Deduction made in a tax year following that in which the bankruptcy order is made

  1. Any repayment due should be calculated in the same way as for subcontractors not involved in bankruptcy proceedings. You will normally become aware of such deductions when the bankrupt submits their SA return or applies for an in-year repayment claim.
  2. If a repayment arises before the subcontractor has been released from the bankruptcy, you should write to the Trustee asking whether they wish to claim the repayment, or, are content for the repayment to be made to the subcontractor.
  3. Make repayment in accordance with the Trustee’s wishes.
  4. Record the details in the papers by obtaining a screen print of the relevant subcontractors’ ‘Payment Details’ window which can be obtained from the ‘View CIS Customer’ function. You should also note the credit/repayment details on the relevant PDS. This is to ensure that any later claim does not result in credit or repayment where this has already been given.