CISR43640 - Register and maintain subcontractor: gross payment or payment under deduction: No Compliance History cases

Where a subcontractor wishes to make an application for gross payment status and they do not have a verified National Insurance Number on an HMRC computer system, possibly because the applicant has come into the United Kingdom from abroad, you will need to take the following actions:

1. The subcontractor should be asked to telephone the CIS contact centre, to arrange for an appointment to be made for them to visit an Enquiry Centre of their choice.
   
   
2. The Contact Centre will tell the subcontractor what documentary evidence to bring to the Enquiry Centre to verify their identity (See particularly the CIS Reform manual at CISR42140 and CISR42150).
   
   
3. The Contact Centre will also ask the applicant to bring with them evidence from the country of origin which shows that they have met all of their taxation obligations in that country, translated into English.
   
   
4. The applicant will also be asked to take with them evidence to show that they pass both the Turnover and Business tests, and proof of what they have been doing for the last 12 months if not fully employed during that time.
   
   

When the applicant calls at the Enquiry Centre you may also need to get them to complete a form CWF1 where they have not already registered for Self-Assessment. The applicant should then also complete one of the following forms:

5. At the Enquiry Centre ask to see the documentary evidence they have brought with them in order to verify their identity, (for a list of acceptable documents see CISR42140 and CISR42150). You must record the documents you have seen in the box provided in the top left hand corner on the front page of the application forms CIS301, CIS302 and CIS304.
   
   
6. Ask to see evidence to show that they pass the business test. The applicant needs to show that they are carrying out a business in the United Kingdom that includes construction, and that the business is conducted by means of a bank account. Other evidence can be Invoices issued, or contracts of purchase orders for construction work.
   
   
7. Ask to see evidence to show that they pass the turnover test. You must check that the applicant has received income (Turnover) of at least £30,000 during the last 12 months (or a shorter period) up to the date of their application, after deducting the cost of materials that they have supplied. It is up to the applicant to show that they have the relevant level of turnover, it will not be acceptable for the applicant to bring you their books and records and expect you to work this out for them.
   
   
8. Where the applicant is a member of a partnership, this turnover threshold will need to be multiplied by the number of 'relevant persons' within the partnership. If the applicant cannot produce evidence to support the figures of Turnover shown on the form, you should ask them to complete a CIS301 for net payment status instead.
   
   

For example, where the applicant is in partnership, and the partnership has three partners, there will be three 'relevant persons', and therefore you will need to see evidence of Turnover of £90,000. Once you have seen evidence of Turnover of £200,000 or more, the Turnover Test will have been passed irrespective of how many 'relevant persons' there are in the partnership.

Finally you will need to check that the applicant passes the Compliance Test.

9. Ask the applicant for documentary evidence from their country of origin showing that they have complied with all of their taxation obligations within that country, translated into English (where necessary), this translation should be provided by the applicant. Alternatively you should ask to see evidence if the subcontractor claims to have been unemployed during the last 12 months
   
   

You must make a clear note in the boxes in the top left hand corner on the front page of the CIS302 of the documents you have seen, and you should show this under 'Proof of Employment Details in the last 12 months'.

10. If you are satisfied that the applicant passes all of the tests, Turnover, Business and Compliance, the application form may be taken from the applicant (after checking that it is signed and dated), and passed to the CIS Team at the National Insurance Contributions Office (NICO) at Benton Park View, Newcastle for Processing along with form CWF1 (if appropriate) for Processing.
    
    

Where however, the applicant clearly does not pass either of the Business, Turnover or Compliance Tests, proceed as in 11 below

11. Ask the applicant to complete one of the application forms to enable them to register for net payment status (CIS301 for an Individual, and CIS304 for a Partner in a Partnership). The application form for net payment status should be passed to NICO for processing in the normal manner.
    
    

If the applicant refuses to make an application for net payment status, you will have no option but to accept the application for gross payment status from them, this should also be passed to the CIS Team at NICO. Where this occurs you must make a prominent note on the form to say that the Business, Turnover or Compliance Test has failed, NICO will then allocate net payment status and a failure letter for gross payment status (CIS308) will then be issued to the applicant.

12. If you have a case where you cannot decide whether or not the Business, Turnover or Compliance tests have been passed or not, you should ask the applicant to photocopy all of the documentary evidence that they have brought with them to support the application (other than the documents that prove their identity).
    
    
13. When the applicant has done this, you should check that the photocopied documents match the original documents and you should also get the applicant to complete an application form for net payment status (CIS301 for an Individual, and CIS304 for a Partner in a Partnership) as well as the CIS 302.
    
    
14. The application for net payment status should be passed to the CIS Team at NICO for processing in the normal manner, and the application form for gross payment status should then be passed with the photocopied documentation to the CIS Advisory Team (See CISR97030) to deal with.
    
    

If the registration application for gross payment is accepted as passing all of the Business, Turnover and Compliance tests, by the CIS Advisory Team they will pass the application for gross payment status to the applicant’s Processing Office who will then use Function [Change TT] in CIS to allocate this payment status. If however, the CIS Advisory Team consider that the applicant fails one (or more) of the tests, the application will be passed to the Processing Office with a recommendation that the applicant should be allocated payment under deduction, the final decision is then taken by the Processing Office.