CISR49630 - Register and maintain subcontractor: Finalising an ‘Incomplete’ scheduled review TTQT - Partners in a partnership

| CISR49000 | Information contents | |—————————————————————————————————–|———————-|

Before finalising an ‘incomplete’ scheduled review TTQT for a partnership you first need to give the subcontractor an opportunity to show that they had a ‘reasonable excuse’ (CISR81020) for the failures identified by the scheduled review and that the identified failures have been remedied without unreasonable delay after the ‘reasonable excuse’ came to an end.

For a partnership, you should take the following action;

  • send a letter to each of the partners (whether registered for CIS or not) who has failures identified saying that HMRC’s records show that the ‘Compliance Test’ (FA04/Sch 11 para 8(1)) is going to fail, with a copy of the letter being sent to their authorised agent
  • outline the failures identified by TTQT in the letter, not only for the partner concerned, but also in respect of the partnership obligations (for example, PAYE obligations) if there are any
  • ask the partner(s) if they have a ‘reasonable excuse’ for their own and the partnership (where applicable) failures (FA04/Sch 11 para 8(3)) before we make the decision as to whether or not to proceed
  • explain in the letter that a response should be made within 30 days, otherwise HMRC will proceed to make the determination to withdraw gross payment status.

Each of the partners in the partnership must show you that there is a ‘reason to expect’ that the partnership will comply in respect of obligations after the end of the ‘qualifying period’ (FA04/Sch 11 para 8(4)).

Where the failures are for the partnership only;

  • send the above letter to the Registered Partner setting out what the partnership failures are.

Along with the letter to the non-registered partner(s) you should;

  • issue a form CIS324 to obtain their authority to disclose their failures to the partner who is registered for CIS.

In addition, if the registered partner has no compliance failures;

  • send a letter to the registered partner informing them of your impending review and the fact that you have written to another partner(s) in the partnership asking for details of any ‘reasonable excuse’ they may have.

Note, however, that you must not disclose to the registered partner until such time as the failing partner has given you authority to disclose their failure(s) on form CIS324.

If, after 30 days, no response is received from any of the partners, you should take the action under ‘Reasonable Excuse’ not accepted below.

If a reply is received, you should consider the ‘Reasonable excuse’ being offered by the partner as the reason why that partner and / or the partnership had not met their compliance obligation(s) and decide whether you can accept this or not.

‘Reasonable excuse’ accepted

If the ‘Reasonable excuse’ is accepted and this partner is the only one with failures identified;

  • update the failure(s) to ‘Not Active’, using the function ‘Manage TTQT’, and the TTQT will then ‘Pass’
  • send a letter to the partner concerned saying that their ‘Reasonable Excuse’ has been accepted for the identified failures.

If this partner is not the Registered Partner;

  • send a separate letter to the Registered Partner saying that the ‘reasonable excuse’ has been accepted and that the partnership will retain gross payment status until the next annual review.

If there are other partners that you have written to who also have failures, you should await for responses from all of them to be received, or for 30 days to have expired from the issue of the letters (whichever is the earlier), before taking action to finalise the TTQT for the partnership.

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‘Reasonable excuse’ not accepted

If the ‘Reasonable excuse’ is not accepted, or no reply is received to your letter(s) or the response is not clear enough to be able to make an instant decision one way or the other, before finalising or confirming the TTQT you should

  • look at the identified failures and check to see whether any of the failures now fall more than 12 months from today’s date.

If this is the case;

  • make these specific failures ‘Not Active’.

If that now means the TTQT for the partnership ‘passes’;

  • issue a letter to the ‘failing’ partner saying that whilst you do not accept that they had a ‘reasonable excuse’ for the failures, upon consideration you have decided to allow gross payment status for the partnership to continue until the next annual review.

Note; there are separate letters to use here, depending on whether the partner(s) did not reply, or whether the partner(s) did not have a ‘Reasonable excuse’.

If you are not already writing to the registered partner;

  • send a similar letter to them informing them of the outcome of your review.

Scheduled Review TTQT still fails

If however the TTQT still fails, having made the obligations that became due more than 12 months from today’s date ‘Not Active’,

  • finalize and confirm the TTQT as a ‘fail’ using the function ‘Manage TTQT’.

When finalising or confirming the TTQT as a ‘Fail’, if your have received a CIS324 from the partners who have failures and to whom you have written to;

  • add the failures of the non-registered partner(s) who have completed and returned the CIS324 as a new failure reason(s).

These failures will also now appear on the CIS308 issued to the registered partner. You must not do this however where authority on CIS324 has not been given to you to disclose the partners’ failures. You should now

  • send a letter to the Registered Partner stating that, following our earlier letter, a formal Determination will shortly be issued withdrawing Gross Payment status for the partnership.

The TTQT is finalised and a CIS308 is issued to the registered partner.

The partnership then has 30 days after the notice of cancellation of gross payment status in which to lodge an appeal against the determination (FA04/s67).

If an appeal is made by the partnership, you should work this in line with the guidance at CISR48000.