| CISR43600 | Action guide contents |
Where a management take-over (or buy-out) leads to the
creation of a new company, the new company should not be allowed to
use ‘inherited turnover’ in making its application for
gross payment status. It may be possible for the new business to
use the ‘transferred receipts test’ to satisfy the
turnover test conditions. Regulation 29(2) allows the turnover
accrued by one business to be taken into account when dealing with
a CIS application for a successor business. Regulation 29(2)(e)
allows the use of the turnover earned by the transferor business in
the qualifying period to be used by the successor business. See
CISR44190. A condition of this test is
that the previous owner would have been able to pass the compliance
test at the date of transfer had this been applied.
Where a company continues to trade under the same company
registration number and UTR after a management buy-out and there is
clear evidence of corporate continuity there can be no objection to
the company continuing to hold its existing CIS payment status.
This is because in terms of operation of the turnover test, there
is no essential difference whether a company changes one or all of
its directors, except for the effect of the ‘relevant
person’ factor.
The critical test for CIS purposes is whether the
‘buy-out’ and any associated transfer of shares
represents a change of control and if so whether the new ownership
poses a compliance risk sufficient to require you to make a
direction under S64(5) to look through the company at the new
directors/shareholders compliance records. See
CISR46110 for more details on making
S64(5) directions.
