| CISR15600 | Action guide contents |
Occasionally, a subcontract arrangement may require that the
contractor makes payments to a nominee of the subcontractor. CIS is
extended to payments to nominees by FA04/S60 (1). Where this
applies the contractor must verify BOTH the subcontractor and the
nominee before making payment. For payment to be made gross to the
nominee, both the subcontractor
and the nominee must be registered for gross
payment.
If the subcontractor and the nominee are not both registered
for gross payment, payment must be made under deduction at the rate
that would apply if the payment is made direct to the
subcontractor. This means that if the subcontractor is registered
for payment under deduction, the standard rate of deduction must be
applied to the payment being made to the nominee. If the
subcontractor is not registered, or cannot be verified for any
other reason, the payment to the nominee must be made under
deduction at the higher rate – regardless of the nominee's
own payment status. The contractor must still make out, and issue
to the subcontractor, a payment and deduction statement in the name
of the subcontractor.
Where a subcontractor entitled to be paid gross suffers a
deduction under this procedure, perhaps because the nominee is not
registered for gross payment in their own right, the subcontractor
may claim an immediate repayment and the claim should be dealt with
following the guidance at
CISR72090.
A subcontractor may enter into a factoring agreement such that
the factor is responsible for collecting the subcontractor's debts.
The factor recovers the debt from the payer (the contractor),
retains a portion under the terms of the factoring agreement and
pays the balance to the subcontractor. If a subcontractor assigns
their right to receive payment to a debt factor, the contractor can
make the payment as if it were being made direct to the
subcontractor.
If we have told the contractor to pay the subcontractor
gross, the payment to the debt factor should also be made gross.
If we have told the contractor to make a deduction from the
payment to the subcontractor, the contractor must make the
deduction from the payment to the debt factor.
The contractor must still make out and issue to the
subcontractor, a payment and deduction statement in the name of the
subcontractor.
