ECH21160 - CIS until 05-04-07 - Failure to Notify a Change in Control in the Company

Regulation 42 Income Tax (Subcontractors in the Construction Industry) Regulations 1993 required a close company that was

• a private company limited by shares and
• either held a certificate or had applied for such a certificate

to notify HMRC of any change in control of the company that was by reason of

• an issue or transfer of shares in the company to
• a person who was not a shareholder in the company immediately before the issue or transfer.

Where a company failed to comply with Regulation 42 a penalty may arise under S98(1)(b) TMA 1970. This penalty consists of an initial penalty not exceeding £300 followed by daily penalties not exceeding £60 per day until the declaration is made.

The initial penalty is determined by the First-tier Tribunal and can be sought even after the failure is rectified. Daily penalties can be authorised by a Grade 6 officer but only as long as the failure continues.

You are most likely to identify a failure to comply with this Regulation when considering whether the Business, Turnover and Compliance Tests (ECH14610) have been satisfied.

You must establish the reasons why the company failed to notify the change in control and seek advice from TAA Liverpool (This text has been withheld because of exemptions in the Freedom of Information Act 2000) before pursuing this penalty.

You must also consider whether the circumstances warrant a change in tax treatment. Further guidance is at

• ECH14650 Cancellation of Gross Payment Registration.