CISR44670 - Register and maintain subcontractor: turnover test: penalties

| CISR44000 | Information contents | |—————————————————————————————————–|———————-|

This action guide explains what you should do where a Post-Acceptance Evidence Check on information supplied for the turnover test reveals discrepancies.

  1. Write to the applicant using the Sample Letter 1 set out at the bottom of this section.
  2. If the applicant replies within 30 days, proceed as follows:

If the explanation is acceptable and you judge that the figures provided were actually correct

  • assign gross payment status subject to any other tests or any other considerations regarding the discrepancies.

If the explanation is not acceptable but you believe the incorrect figures were supplied as a result of a genuine misunderstanding

  • issue a letter indicating that you are assigning net payment status
  • do not pursue the question of penalties

If the explanation suggests the figures were intentionally falsified to ensure a turnover test pass and you believe there is sufficient evidence to satisfy the Commissioners that the applicant has acted ‘knowingly or recklessly’

  • issue a letter refusing gross payment status based on the Sample Letter 2 set out at the bottom of this section.
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  1. If the applicant does not reply within 30 days
  • issue a gross payment status refusal letter using the Sample Letter 3 set out at the bottom of this section
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  1. If the CIS Advisory Team advises that penalties should be applied, an officer of at least Grade 7 should make the penalty determination
  2. If the applicant appeals against the penalty determination, examine the case put forward by the applicant and if you wish to stand by the original decision, you should make the offer to the applicant of an internal review of the decision. If the applicant takes this up you should follow the guidance in ARTG4000. If however subsequent to this the applicant makes an appeal direct to the Tribunal for hearing, the Appeal Unit will call for the papers to present the case at the Tribunal.
  3. After the internal review or Tribunal hearing
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • if the penalty stands unaltered, release it for payment
  • if the penalty is amended, amend the penalty determination accordingly and release it for payment
  • if the penalty is reduced to nil, amend the penalty determination accordingly.

Sample Letter 1

Use this sample letter to write to a subcontractor to question certain figures submitted for the Turnover Test.

Dear

APPLICATION FOR GROSS PAYMENT STATUS - TURNOVER TEST

I have compared the figures shown on your application form with information I have on record about your business. I find the following apparent discrepancies:

[Processing Office to complete]

Can you please let me have your explanation of the difference, if you wish to pursue your application. This information is requested solely in respect of your application for gross payment status, and does not prejudice HMRC’s right to open an enquiry in the future.

Please note that if you do not reply to this letter within 30 days, I will formally refuse to assign gross payment status based on the figures that I have on record. I will also need to consider whether to issue a penalty determination on the basis that you have knowingly or recklessly made a false statement in your application. The law provides for a penalty of up to £3,000 in these circumstances. If you do reply within 30 days, any penalty determination if appropriate will take into account your explanation.

Sample Letter 2

Use this sample letter to write to a subcontractor to refuse gross payment status where incorrect information was supplied by the applicant and the correct figures do not pass the test. It also warns that penalties are being considered.

Dear

APPLICATION FOR GROSS PAYMENT STATUS - TURNOVER TEST

Thank you for your letter of……

GROSS PAYMENT STATUS

I regret that your application for gross payment status has been refused, as your business has failed the Turnover Test. The correct figures for the turnover test appear to be as follows: [officer to set out figures and result]. You have therefore been assigned net payment status under the Construction Industry Scheme. You may appeal against this decision in writing within 30 days of the date of this notice. At any appeal hearing the grounds for refusal would not have to be limited to the turnover test failure alone, and other aspects of your application might be presented to the Tribunal.

PENALTY

As indicated in my earlier letter to you, there are penalties for supplying false information in connection with an application for gross payment status. The question of penalties in your case is being considered. If a penalty determination is issued, you may appeal against that within 30 days of the date of its issue.

Sample Letter 3

Use this sample letter when writing to a subcontractor who has not replied to your earlier enquiries about incorrect figures to refuse gross payment status and notify the subcontractor that a penalty is being considered.

Dear

APPLICATION FOR GROSS PAYMENT STATUS - TURNOVER TEST

I wrote to you on xx/xx/xx (copy letter attached).

In the absence of a reply, I assume that the figures I have on record are correct. I regret that your application for gross payment status has been refused, as your business has failed the turnover test. The correct figures for the turnover test appear to be as follows:

[Processing Office to set out figures and result]

In the meantime you have been assigned net payment status and this allows you to receive payments after deduction on account of tax.

You may appeal against this decision in writing within 30 days of the date of this notice. At any appeal hearing the grounds for refusal would not have to be limited to the turnover test failure alone, and other aspects of your application might be presented to the Tribunal.

PENALTY

As indicated in my earlier letter to you, there are penalties for supplying false information in connection with an application for gross payment status under the Construction Industry Scheme. If a penalty determination is issued, you may appeal against that within 30 days of the date of its issue.