The Scheduled Review (Ongoing TTQT)

Contents

What is this page about?

This page tells you about an important change that was introduced in the Construction Industry Scheme (CIS) from mid-October 2007. The change relates to the introduction of the 'Scheduled Review' – also known as the 'Ongoing TTQT (Tax Treatment Qualification Test)' which may affect you if you are a subcontractor that currently holds gross payment status.
All references in this document to subcontractors apply regardless of whether your business is a sole-trader, a partnership firm or a limited company.

What is the Scheduled Review?

The law entitles us to check that, where you hold gross payment status, you are continuing to comply fully with your tax obligations. We do this by running a Scheduled Review, which is also known as an 'Ongoing TTQT'. The Scheduled Review began in mid-October 2007 and entails an automated check on your compliance history – but only where you currently hold gross payment status.

Will the Scheduled Review be run against every subcontractor?

No. The Scheduled Review will only look at your compliance history where you currently hold gross payment status. That means, if you are paid under deduction, you will not be part of the Scheduled Review.

Will the Scheduled Review look at all gross paid subcontractors at once?

No. We will be running the Scheduled Review over a rolling period of 12 months against all subcontractors that hold gross payment status. This means that we will be looking at the compliance history of roughly two per cent of all subcontractors with gross payment status each week in any one year. When we have reviewed all subcontractors by the end of the 12-month period, we will start again so that the compliance history of every subcontractor holding gross payment status is looked at once in every successive period of 12 months.

Can you give an example of how the Scheduled Review will work?

Subcontractor ABC Ltd holds gross payment status, which it has held since before the current Construction Industry Scheme started. In December 2008, its compliance history comes up for review under the Scheduled Review. Each weekly batch chosen for review will represent about two percent of the total subcontractor population holding gross payment status.

How is the selection process undertaken?

Subcontractors will be chosen at random for each weekly batch for review in each 12-month period. It does not matter how long you may have held gross payment status. You will not, however, normally be selected for a Scheduled Review more than once in any 12 month period.

Will I be told when I am to be selected for a Scheduled Review?

No.

What is looked at when the review is undertaken?

We will look at your compliance history for the period of 12 months leading up to the date of the review. In particular, we will be looking to see that you (and any partners where you are a partnership) have complied with your obligations as a taxpayer or employer/contractor in the 12 months leading up to the review.

This means that, during that period, you, your company and any partners in your partnership must have done all the following:

  • completed and returned all required tax returns
  • supplied any information to do with your tax that we may have requested
  • paid by the due dates
    • all tax due from yourself or the business
    • all your own National Insurance contributions (NICs)
    • any PAYE tax and NICs due from you as an employer
    • any deductions due from you as a contractor in the construction industry

What if my compliance history is not perfect – will I still pass?

When considering whether your compliance history is satisfactory during the 12 month period of the review, we will ignore any, or all, of the following failures:

  • three late submissions of the contractor monthly return, including 'nil' returns – up to 28 days late
  • three late payments of CIS/PAYE deductions – up to 14 days late
  • one late payment of Self Assessment tax – up to 28 days late
  • any employer's end of year return made late
  • any late payments of Corporation Tax – up to 28 days late, including where any shortfall in the payment has incurred an interest charge but no penalty
  • any Self Assessment return made late
  • any payment not made by the due date, where it is less than £100

We know that, for a number of reasons, some contractors had difficulties in filing their monthly returns on time in the early months of new CIS. Therefore, we have decided that we will also ignore all late submissions of the contractor returns for the first three months of the new Scheme, regardless of whether the returns were on paper or online. Consequently, returns that came in late for the months ending 5 May, 5 June and 5 July 2007 will not be regarded as failures under the Scheduled Review.

We cannot, however, ignore continued non-submission of these returns. Likewise, if returns for any of these three (and any later) months were not received by us by 19 October, they will incur penalties.

What criteria will lead to my business failing the review?

You will fail the Scheduled Review if any of the following criteria are present during the 12 month review period.

We have received:

  • your contractor monthly return (including nil returns) late on four, or more, occasions
  • one of your contractor monthly returns (including nil returns) more than 28 days late
  • your CIS/PAYE deductions late on four, or more, occasions
  • one of your payments of PAYE/CIS deductions more than 14 days late
  • one payment of your self assessment tax more than 28 days late
  • one payment of your corporation tax more than 28 days late

Or, at the date of the review, you have still outstanding, an overdue:

  • employer's end of year return (form P35)
  • Self Assessment return

* References above to the contractor monthly return include 'nil' returns, where appropriate.

Can you give further examples of passes and failures?

  • Passes - If your only compliance failures in the 12 month review period are similar to the following two examples, you will pass the review and retain your gross payment status for a further 12 months.
    • We receive your contractor monthly late on one, two or three occasions but, although late, no return is received by us more than 28 days after the due date of the 19th of the month. We receive your PAYE payments late on one, two or even three occasions but none of these is received by us later than 14 days after the due date.
    • You are a sole trader and we don't receive one of your Self Assessment payments until 22 days after it was due. We have also received your Self Assessment return beyond its due date.
  • Failures – If any of your compliance failures in the 12 month review period are similar to the following examples, you will fail the review and will lose your gross payment status.
    • We receive your contractor monthly return after its due date on four or more occasions.
    • We receive a single contractor monthly return more than 28 days late.
    • We receive your PAYE payments due from you as an employer late on four or more occasions or we receive a single payment more than 14 days late.
    • You have not submitted your SA, CT or employer end of year returns.

My business is a company. Do you look at the compliance history of each director as part of the Scheduled Review?

When we undertake a Scheduled Review of a company, although we have, and reserve, the legal right to look at the compliance of each 'relevant person' (that is, company director and, in some cases, beneficial shareholder) as part of the review, we currently do not have any plans to do this. Instead, for the purpose of the Scheduled Review, we will look solely at the compliance history of the company itself.

Does the Scheduled Review check that I still pass the Business and Turnover tests?

These tests do not currently form part of the Scheduled Review, but there is still a requirement for you to meet these on a continuing basis if you are to retain registration for gross payment.

Will there be any 'human' intervention in the Scheduled Review process?

The Scheduled Review process is automated and involves the CIS computer system looking at the records we hold for subcontractors on our other computer systems; for example, PAYE, Self Assessment, Corporation Tax and so on. However, until such time that we are fully satisfied that the system is making the right decision in every case, each failure of the Scheduled Review will be checked carefully by a central team before any notification is sent out to the subcontractors involved. This will ensure no subcontractors are failed in error.

If I fail the Scheduled Review, what happens next?

If you fail the review, because your compliance history in the 12 months before the review is not satisfactory, we will write to you shortly afterwards to tell you that we are taking away your gross payment status and that you will revert to being paid under deduction. The letter will give you full details of the compliance failures which have lead to that decision and how to appeal if you believe that the decision is incorrect.

I have failed the Scheduled Review. Is my gross payment status removed immediately?

No. We will write and tell you that your gross payment status is to be withdrawn in 90 days' time. This is to allow you to appeal, if you consider that the decision is incorrect, and to make the necessary adjustments to your business in preparation for the switch from being paid gross to being paid under deduction.

Can I appeal over the decision to take away my gross payment status?

You have the right of appeal against our decision to take away your gross payment registration. If you believe, on considering the reasons we have set out in the decision that the facts are incorrect or that there is some reasonable excuse why you have failed to meet one or more of the listed obligations, you can submit an appeal, which must be in writing, within 30 days of the date of issue of the notice that informs you we are taking away your gross payment status. The appeal should be sent to the address that is shown on the letter we have sent you.

What happens when I appeal?

We will acknowledge receipt of your appeal. We will then look at the grounds for your appeal. If we agree with your grounds of appeal, we will write and tell you and the cancellation of your gross registration will be overridden. Your registration will then continue until the next review date.

If we cannot agree that your grounds of appeal are valid, the case will be listed for a hearing before the independent Appeal Commissioners. This is an independent body that will listen to both arguments and come to a decision in favour of either you or HM Revenue & Customs (HMRC). That decision is normally accepted as binding by both parties unless, very exceptionally, either party believes the decision is wrong in law, in which case there is the option to pursue the matter further.

Do I keep my gross payment status if I appeal?

Yes. You will keep your gross payment status for as long as it takes to resolve the appeal, either by agreement between us or by a hearing before the Appeal Commissioners. Only you will know that there is any question as to your entitlement to gross status. Any contractor verifying your business during the appeal process will simply be told to pay you gross.

If, eventually, your appeal is unsuccessful, we will write and tell you and any contractors that have engaged you in the current or two previous tax years. We will grant you, from the date of the letter, a period of 30 days or the remainder of the original 90-day period where this is longer, before you switch from gross payment status to that of payment under deduction.

For example, if you lose your appeal 45 days into the 90-day period, you will have the balance of the 90 days (45 days remaining) before switching to payment under deduction. If your appeal is resolved at day 80 of the 90 day period, as there are only ten days remaining of the original 90 day period, you will be granted 30 days from the date of the letter before contractors must pay you under deduction. Likewise, if the 90 day period is past, you will still get 30 days from the date of the letter before you change to payment under deduction.

How do contractors I undertake work for know that I have lost my gross payment status?

You will get a 90 day period from the date of the letter telling you that you have lost your gross payment status before it is eventually taken away. If you choose not to appeal, then around 55 days after we have written to you (that is, about 35 days before the end of the 90 day period), we will write to each contractor that has engaged you in the current or two previous tax years, to advise them that, from a particular date (the end of your 90 day period), all payments they make to you must be made under deduction. If you have appealed over the withdrawal of your gross payment status, and this is not resolved by 55 days after we first wrote to you, no letters will be issued to the contractors. In these circumstances, we will only contact your current and previous contractors after your appeal has been determined and has been unsuccessful. Of course, if the appeal succeeds, no further action is necessary.

What will contractors be told about my position during the 90 day period when they verify me?

Contractors verifying you during the 90 day period, before you lose gross payment status, or during any longer period during an appeal, will not be told that you are to lose your gross payment status. You will be verified on the basis that you hold gross payment status.

Typically, on what grounds may I appeal?

Your grounds of appeal would be that, for some reason, the decision was incorrect. That would normally mean that you disagree with the correctness of one or more of the details supporting the decision or you believe you have a reasonable excuse for the particular compliance failure(s) and that you took all reasonable steps to rectify matters as soon as the reasonable excuse ceased.

For example, your failure may have been in sending your contractor return late on one occasion where it was received by us 28 days after the due date. It is your responsibility to make a return to us regardless of whether or not we have managed to issue a paper return to you in the first place (don't forget, if you need another return, telephone the CIS Helpline on 0845 366 7899). Where, however, you did everything in your power to get hold of a return to complete and return to us but, despite your best efforts and possible postal problems, you simply weren't able to get it to us within 28 days after its due date, you may decide that these are sufficient grounds to appeal.

Similarly, if in the first six months of implementation there were technical problems with the software you were using to submit your monthly returns which led to returns being late or rejected, this may be grounds for appeal.

Another example may have been where you were taken ill and were unable to make your payments of PAYE/CIS deductions on time leading to a compliance failure. If you believe you did everything in your power to meet your obligations and did not have anybody else, such as a wages clerk, that could have met your obligations for you during the failure, you might feel this is also sufficient grounds to appeal, especially if you put matters right as soon as you were able.

I lost my gross payment status. When can I reapply?

If, following a Scheduled Review of your compliance history, we cancel your gross payment registration, you cannot reapply until one year from the date that your gross payment status was cancelled. If you appealed over the original decision and the appeal was eventually decided against you, perhaps by the Commissioners or the Courts, you will not be able to reapply until one year after the date your gross payment status was cancelled following the conclusion of the appeal. So, in all cases, regardless of whether your appeal delays the original date of removal of gross payment status, you cannot reapply for gross payment status until one year after the actual date your gross payment status was taken away from you.