repayments: issue repayment: in-year repayments to subcontractors
Under SA a subcontractor is entitled to receive credit for CIS deductions
- After the end of the tax year in which the deductions were made
- Following receipt of the SA return
However, a subcontractor who is an individual sole trader or partner may also be entitled to have deductions repaid in-year once the accounting period, which determines the profit for the year, has ended. This applies to businesses that are continuing or have ceased and is subject to certain conditions being met under the statutory authority of Regulation 17 SI2005/2045 (from 6 April 2007). See CISR75030 in the Construction Industry Scheme Reform (CISR) manual for more information.
Regulation 17 SI2005/2045 defines the basis on which a repayment is calculated. This takes account of profits chargeable for the whole of that year and allowances due up to the date the application for repayment is made.
A request for an in-year repayment must be made on the form CIS40, or CIS41 where the request is in respect of deductions attributable to a partnership. An in-year repayment from a partner can only be allowed where all the other members of the partnership sign a statement of consent.
Where a subcontractor requests an in-year repayment and has income from more than one business within the Construction Industry, for example both sole and partnership businesses, both forms CIS40 and CIS41 should be completed. In such cases details of all Construction Industry profits and deductions must be submitted in order for the in-year repayment to be made. Repayment should not be made unless all the necessary information has been provided. Where the information supporting an in-year repayment request is incomplete, the taxpayer should be contacted and advised to submit the missing information in order that the repayment request can be processed.
Partners should be advised to ask their agent to calculate their share of the profit where they are represented or, where they are unrepresented, invited to ask for help from their local tax office responsible for processing activities. Where help is required the case should be submitted to an Inspector to arrive at the share of taxable profit.
When considering a request for an in-year repayment you should examine all aspects of the subcontractor’s tax affairs to ensure that they are up to date. If any doubt exists about the correctness of the details supplied, repayment should be refused and the taxpayer advised that the request for repayment will be considered
- After the end of the year of deduction
- Following receipt of the SA return
Note: Whilst there is no right of appeal against HMRC refusal to make an in-year repayment, refusal should only be made where there are strong grounds for doing so. More information can be found at CISR75050 in the Construction Industry Scheme Reform (CISR) manual.
If the subcontractor income has ceased, an in-year repayment can be requested. The request must be made on form CIS40 (or CIS41 where the request is in respect of deductions attributable to a partnership). More information can be found at CISR75030 in the Construction Industry Scheme Reform (CISR) manual.
Where the taxpayer has ceased self-employment and has taken up employment (including change of status) the maximum allowances should normally be given against the PAYE source. If the taxpayer requests repayment you should
- Allocate a proportion of the allowances against the CIS income related to the length of time in self-employment (for example, if the self-employment ceased on 30 September allocate half the allowances against the CIS income) and repay on that basis
- Notify the PAYE source of the balance of allowances (PAYE managers should ensure that the appropriate coding is issued as soon as possible, using a Week1 / Month1 basis if appropriate)
Other in-year repayment requests
Existing procedures at CISR72630 in the Construction Industry Scheme Reform (CISR) manual will continue to apply when dealing with a request for an in-year repayment where the subcontractor
- Holds gross payment status
- A CIS deduction is made in error
In cases of permanent cessation (that is death or emigration) detailed advice on the action to take is provided in section ‘Permanent cessation’ (SAM90000 onwards).
Set-offs and repayments
Where pre-SA arrears exist these may be covered by CIS deductions for the current year, if the taxpayer requests it, even if the subcontractors accounting period determining the profit for the current year has not yet ended. The instructions contained at CISR75060 in the CISR manual should be applied to set-offs against pre-SA arrears.
CIS deductions cannot be credited against payments on account, but in-year repayments can. Where an in-year repayment is agreed, the repayment may be used to set against an outstanding liability, including a payment on account.
Note: SA legislation does not allow for payments on account to be reduced other than on an equal basis (Section 59A (4) TMA).
Making a repayment / set-off
Where an in-year repayment is requested, SA function CREATE FREESTANDING CREDIT will be used where a credit is to be entered on the SA record. Following the use of this function a credit will be created on the SA record which will be available for repayment or allocation against an SA charge.
Note: The effective date of payment (EDP) will be the date the CIS40 / CIS41 claim was received. Repayment supplement is not applicable in these cases.
Where a credit from CIS deductions is to be set-off against an earlier year’s SA charge, the EDP of the credit will be the date the CIS40/CIS41 was received. See subject ‘Effective Dates of Payment’ (SAM110070).
More detailed advice on creating a freestanding credit is provided in subject ‘Freestanding Credits’ (SAM110080).
Where a customer wants a SA CIS ‘in-year’ repayment transferred to settle a pre-SA debt held on SAFE, the SA freestanding credit will need to be transferred to SAFE using a SA331 OAS Allocation form, available from SEES Forms and Letters. For further information, see DMBM210195, step 7.
Verification of the payment of a subcontractor under CIS can be carried out online for payments made after 5 April 2007 (recorded on the CISR system), but verification of payments made before this date (recorded on the CISL system) have to be requested by e-mail from the ‘CISL Archive’ (see below).
The Action Guide on how to verify payment and deduction details on CISR, can be found at CISR73620 in the Construction Industry Scheme Reform (CISR) manual.
CIS Legacy (CISL) System
The CIS computer system used to record Construction Industry Data from 1 August 1999 up to 5 April 2007 (CISL) was decommissioned on 19 May 2010.
The new CISR (Construction Industry Reform) system introduced in 2007 continues to record Construction Industry Data from 6 April 2007 onwards.
Following the decommissioning of CISL the data held on it could no longer be accessed and so a ‘CISL Archive’ was created to hold the following information
- Voucher data for the years 2004-05, 2005-06 and 2006-07
- Certificate details for all years
- Registration Card details for all years
- End of year details for the years 2004-05, 2005-06 and 2006-07
- Designatory details updated to 05/04/2010
- Migration to CISR details that took place in April 2007
Only a limited number of staff have access to the CISL Archive and so in order to request details from this, you must send an email to the CISL, Archive (IMS) mailbox.
You must include in your email request what data you require and the reason why it is being requested. You must also provide the following information to enable a search of the archive to take place
- UTR (Unique Taxpayer Reference)
- The period to which the vouchers relate (minimum 1 month, maximum 12 months, both start and end dates required)
- Whether the taxpayer is the subcontractor or contractor
- If single voucher details required, the voucher serial number
The Data will be provided in Excel spreadsheet format and will be emailed back to the person requesting the information only. Allow five working days for a data request to be dealt with.