| CISR43600 | Action guide contents |
Where a sole trader or partnership becomes a company the new
business must register for CIS and apply for gross payment status
before it can be paid without deductions being made.
Where the CIS Team at NICO receives an application involving
a change in the type of concern where a previously registered sole
trader or partnership have now formed a company, these applications
will be referred (with a covering memo) to the Processing Office of
the business, to take action on Self Assessment (SA) to ensure
that the SA record is updated, see the Self Assessment Manual
(SAM) at SAM101000. Once the SA and COTAX records have been updated
the Processing office should then continue to process the
Registration application from the company for either net or gross
payment status, and these should
not be referred back to the CIS Team at NICO.
The new company may use the ‘Inherited Receipts’
test based on previous turnover to satisfy the turnover test. There
must be true continuity if the new concern is to rely on
‘inherited’ turnover from a previous period of trading.
Put simply this means the same people running the same type of
business.
The applicant’s type of concern at the date of application
is company, and so the company rules apply.
The applicant should use form CIS305 for the turnover test
and should supply a covering letter explaining how the
‘relevant persons’ figure is made up.
The company is able to use the net construction turnover
earned by the sole trader or partnership in the qualifying period
to satisfy the requirements of the turnover test. See
CISR44190 for more information on
‘Inherited receipts’.
The applicant must pass both the business and compliance tests
before gross payment status is granted. The business test is run at
the same time as the turnover test is completed; the compliance
test is only undertaken when both the turnover test and business
test have been passed.
The type of concern at the time of application is a Company;
therefore the compliance test will apply to each ‘relevant
person’.
Should you encounter the reverse situation, that is, a partnership is dissolved with one partner carrying on the business as a sole trader, see ( CISR97030) about seeking advice in this circumstance from the CIS Advisory Team
