ECH21220 - CIS from 06-04-07 - Failure to Notify a Change in Control of a Company

Regulation 53 Income Tax (Construction Industry Scheme) Regulations 2005 requires a close company that is

• a private company limited by shares and
• is registered for, or applying to be registered for gross payment

to notify HMRC of any change in control of the company that is 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 fails to comply with Regulation 53 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 notification is made.

The initial penalty is determined by the Commissioners 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.

CIOs 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.

CIOs must remain aware that a change in control of the company soon after registration for gross payment has been obtained could indicate deliberate manipulation to obtain registration for Gross Payment.

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

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

• ECH14650 Cancellation of Gross Payment Registration.