CISR43110 - Register and maintain subcontractor: gross payment or payment under deduction: notification of refusal

Applicants who fail in their gross payment status application are notified in writing on form CIS308 of the reasons why the application has failed. If an application fails because it is unable to meet the requirements of the ‘Turnover test’ or the ‘Business test’ a CIS308 will be issued detailing the reasons why the application has failed to meet the requirements of these two tests. The Compliance Test will only be run once an application has met the requirements of both the ‘Turnover test’ and the ‘Business Test’.

However, where the application for gross payment is from a Company or a Partner in a partnership, the CIS308 will detail only the failings of the company or of the partnership. It will not detail the failings of any individual Director or Shareholder or in the case of a Partnership the failings of a particular partner. Instead a message which says the following will appear on the CIS308:

Company

''For the company to be registered for gross payment, all directors and shareholders must have complied with their tax obligations. Unfortunately the company has failed this test, so we have to refuse gross payment status''.

Partnership

''For an individual to be registered for gross payment as a partner in a firm, all the partners must have complied with their tax obligations. Unfortunately the partnership has failed this test, so we have to refuse gross payment status''.

The reason for the CIS308 displaying this information only, is so that there is no disclosure regarding the failures of a particular director or shareholder or of another partner in a partnership to a third party without the express authority of the individual concerned. Once a CIS325 (Director or shareholder) or a CIS324 (partner) has been completed by the individual then compliance failures made by them may then be disclosed as necessary.

The applicant has the right of appeal against the refusal to grant gross payment status. Any subsequent appeal hearing should deal with all the reasons for the application failing.

A subcontractor that has failed in their application for gross payment status is automatically granted net payment status. Once gross payment status has been removed, the subcontractor will not be able to apply for gross tax treatment again until 12 months after the date net payment status commenced.