CISR46070 - Register and maintain subcontractor: compliance test: timely compliance

It is not sufficient for a gross payment applicant merely to have fulfilled all tax obligations falling due in the qualifying period. In general, the applicant must also have fulfilled those obligations in the time allowed by law.

Where there are outright compliance failures, that is, unfulfilled tax obligations such as outstanding returns or unpaid tax, you should consider them first in reaching your decision. If there are no outright failures you should then consider whether obligations arising in the qualifying period were met within the time limits allowed. Instances of late compliance identified should be within the compliance tolerance described at CISR46080 otherwise the applicant has failed the test.

The requirement for timely compliance is part of the CIS legislation, and must be applied strictly. Subcontractors should only be granted gross payment status where failures are within the compliance tolerance otherwise you must refuse to grant this status.

Subcontractors with voluntary arrangements

If a formal voluntary arrangement exists and the subcontractor seeks gross payment status you should make allowances for it when looking at whether the applicant has paid tax on time. However, if you decide to grant gross payment status on that basis, you should advise the subcontractor that if you are notified by the DMB section at any stage that the subcontractor has defaulted on the arrangement you may cancel this status.

For applications for gross payment status from individuals or companies in voluntary arrangements you should carry out the turnover test and business test, and the compliance test as far as possible.

Voluntary arrangements entered into by partnerships are rarely encountered. You should seek the advice of the CIS Advisory Team (See CISR97030) where you do become aware of such a case.

Your review of the applicant's compliance should establish whether the applicant has kept to the terms of the voluntary arrangement. You may need to consult Enforcement Office.

Where the failure which the voluntary arrangement applies to was within the twelve months leading up to the application, you should submit the case to the CIS Advisory Team with a copy of the voluntary arrangement. Where the original failure was more than twelve months before the application there is no need to submit the case.

Subcontractors with informal arrangements to pay

A subcontractor may have entered into an arrangement with the DMB section to allow late payment of their outstanding liabilities. This may occur where a subcontractor has previously been refused gross status and has had cash flow problems as a result of moving to payment under deduction.

If an arrangement like this exists and the subcontractor applies for gross status, you should make allowances for it when looking at whether the applicant has paid tax on time. However, you should submit the case for advice to the CIS Advisory Team ( CISR97030) with a report of the circumstances.

Where exceptionally the arrangement was set up more than twelve months before the application there is no need to submit the case.

If following a submission to the CIS Advisory Team you authorise gross payment, you should advise the subcontractor that if you are notified by DMB section at any stage that the subcontractor has defaulted on the arrangement you may withdraw the gross status.