Guidance

Securities in respect of Construction Industry Scheme (CIS) deductions

Published 6 April 2019

We’ve provided this information because we’ve told you that you may have to give security. If you have a tax adviser, you may want to talk to them and show them any correspondence that we’ve given you.

Tax law allows us to require a contractor to give an amount of security if there’s a risk that they’ll not pay Construction Industry Scheme (CIS) deductions which are due.

You can read more guidance on this in the The Income Tax (Construction Industry Scheme) Regulations 2019.

Who may have to give security

It’s the contractor who must give security. Where the contractor is a limited company or a Limited Liability Partnership (LLP), security may also be required from:

• one or more of the company directors
• any similar company officer
• company partner
• scheme representative
• personal representative
• any person with the same responsibilities

Where we believe that more than one person is in a position to influence the payment of CIS deductions to us, each of those people will be legally responsible for giving the whole of the security. This is called being jointly and severally liable. In practice the security can be given by any or all of those people, as long as the security is given in full. You can also find out about when security is not paid in full.

In partnerships (except LLPs) all partners are jointly and severally liable for any CIS deductions of the partnership. Where we give a notice of requirement to a partnership, all partners will therefore be jointly and severally liable to give security.

Authorising a representative

You can authorise someone to deal with us on your behalf. This includes professional tax advisers, friends or relatives. If you want to authorise a professional tax adviser, they’ll be able to give you a form to complete and send to us. If you want to authorise someone other than a professional tax adviser, you’ll need to tell the officer you’ve been dealing with, who you want to authorise and what you want them to deal with for you.

The notice of requirement to give security

If we require a contractor to give security, we’ll issue them with a notice of requirement. This will show the amount of security required, the date by which it’s required and how long we’ll hold the security for. It will also show the way in which the security must be given.

Where there is joint and several liability, we’ll also issue a notice of requirement to each person, which will show the total amount of security required. It will also show the names of all those in the business who have been asked to give security.

When we may issue a notice of requirement

We may issue a notice of requirement to pay security if an HMRC officer considers this is necessary to protect the CIS deductions which a contractor is or may be liable to pay.

Whether or not such a risk is there, they will always be considered on a case by case basis. We expect to use these powers only for contractors that are considered to be at a high risk of non-payment because:

• those in control of the contractor’s tax affairs are connected with a previous business failure which resulted in a loss of tax
• we have reason to believe that they might fail to comply with their CIS deduction obligations

Sending a warning letter before the notice of requirement

Normally we’ll send a letter warning the contractor that we may require security. However, if we believe that sending a warning letter will increase the risk that CIS deductions will not be paid, we may send or hand deliver a notice of requirement without warning.

How long we will hold the security for

We normally hold security for CIS deductions for 24 months. During this time we will monitor the contractor’s tax affairs. We may return the security earlier than 24 months if we believe that the contractor is no longer at risk of not paying the CIS deductions due.

How we calculate the amount of security

We calculate the amount of security using a formula based on:

• the amount of CIS deductions paid or due to be paid by the contractor for a 4-month period plus
• an amount equal to any current arrears of CIS deductions due from the contractor (excluding any amounts already subject to a time to pay arrangement agreed between the contractor and HMRC, with which the contractor is complying)

Please note although we use the amount of any arrears of CIS deductions as a way of calculating the amount of security, this does not affect the arrears. We will continue to pursue payment of any arrears in the normal way, including any interest and penalties due.

Issues you may have before giving security

What happens if security is not given in full

It’s a criminal offence to not give the CIS deductions security shown on a notice of requirement.

Where the security is not paid in full within the time required we may prosecute the contractor and any of the persons who received a notice of requirement. In the event of a successful prosecution, you may have to pay a fine. The value of the fine will be set by the court and has no limit.

Making a time to pay arrangement for arrears of CIS deductions

Agreeing a time to pay arrangement with us allows a contractor to pay their arrears of CIS deductions over an agreed period of time. If a contractor needs more time to pay the tax it owes and would like to make a time to pay arrangement with us, or would like more information about this, the office that sent this factsheet should be contacted.

If we have issued a notice of requirement, we must be contacted before the date that security is required. If a contractor requests a time to pay arrangement, we will extend the time allowed for providing the security while we consider the request.

If we do not agree a request to a time to pay arrangement we will write to inform the contractor. The security will be required within 30 days of our decision letter.

How to pay your security for CIS

You can give us security by either:

• making a payment
• providing a guarantee in the form of a performance bond

Making a payment

If you want to give us a security by a performance bond, contact the office that gave you this information. Before making a payment you should contact your bank or building society to confirm the services available to you, you need to think about:

• any daily value limits
• how long they will take to transfer the money
• the latest cut-off times for making a payment

Direct debit

If you’re registered to use HMRC Online Services you can set up a Direct debit online to collect your payment.

You should set up the Direct Debit at least 5 working days before the date you want your payment to be collected.

There is no online service just for these payments so you can only use this service if you’re registered for:

• Self Assessment online
• PAYE for employers
• Corporation Tax online
• Construction Industry Scheme (CIS) online
• Machine Games Duty online
• VAT online

Bank details for online or telephone banking

If you’re paying by online or telephone banking you can select ‘HM Revenue and Customs’ from your bank or building society’s beneficiary list (sometimes called a payee list). Or you can set up a manual instruction using either:

• Bacs
• Faster Payments
• CHAPS

And using the bank details below:

Sort code: 08-32-10
Account number: 12001020
Account name: HMRC Shipley

Debit or corporate credit card

You can pay online and make a debit card or corporate credit card payment to Pay other HMRC taxes, penalties or enquiry settlements.

At your bank or building society

Take your payment and HMRC payslip enclosed with the notice of requirement to your own bank or building society branch.

Make cheques payable to ‘HM Revenue and Customs only’ and ensure that you write your security reference number on the back.

By post

If you’re unable to pay by any of the above methods, you can pay by post. Make cheques payable to ‘HM Revenue and Customs only’ and ensure that you write your security reference number on the back. Post it, with your HMRC payslip enclosed with the notice of requirement to:

HMRC Direct
BX5 5BD

Forms of security we’ll accept

We’ll only accept:

• an electronic payment to a specified HMRC bank account
• a cheque
• a banker’s draft
• a guarantee in the form of a performance bond authorised and approved by a financial institution

We cannot accept property or items such as high value motor vehicles or boats as security. If you need further information about the accepted forms of security, you can ask the officer you’ve been dealing with.

If we require security from you and you disagree with our decision

If we send you a notice of requirement and you disagree with anything in the notice, you can appeal.

You need to write to us no later than 30 days after the day on which you receive the notice of requirement, telling us what you disagree with and why. We’ll then contact you to try to settle the matter.

If we cannot come to an agreement, we’ll write to you and tell you why. We’ll then offer to have the matter reviewed by an HMRC officer who has not previously been involved in the case. We’ll also tell you about your right to go to an independent tribunal.

You can find more information about appeals and reviews or phone our orderline on Tel: 0300 123 1024.

Issues you may have after giving security

Using the security to pay what is owed

If a contractor gives security and then fails to pay CIS deductions due, we may use some or all of the security to pay what they owe. We may then require them to give further security where a continuing tax risk is identified.

Asking for a reduction in the value of security already given

A person who has given security for CIS deductions can apply for the value of the security to be reduced. We’ll consider an application where the person’s circumstances have changed significantly since the security was given. Where we agree, we may return some or all of the security.

We’ll consider an application for a security to be reduced where:

• there is a change in the person’s circumstances because:
  • they are suffering hardship
  • they are no longer a contractor, company director or other similar company officer, partner, scheme representative, personal representative, or person purporting to act in such a capacity
• there has been significant change in the business such that:
  • the amount of security required exceeds what is necessary to protect the revenue
  • the contractor no longer represents a tax risk

Only a person who has given the security, or contributed to giving the security, can ask for a reduction in its value.

If you need help or more information

If you have any questions about securities, contact the officer dealing with the check.

If you are unhappy with our service

If you are unhappy with our service, tell the person or office you’ve been dealing with. They will try to put things right.

If you are still unhappy, they’ll tell you how to complain. Read more information about complaints and appeals.