CISR51090 - Verify subcontractor: overview: verification - effect of contractor scheme changes

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General

Before making a first payment to a subcontractor the contractor must contact HMRC to confirm that the subcontractor is known and registered with CIS and to obtain details of the subcontractor’s payment status. This process is known as ‘verifying the subcontractor’and is necessary so the contractor may determine whether or not a deduction should be made from the payment on account of tax.

Before contacting HMRC to verify subcontractors, the contractor must have an active contractor PAYE scheme under which the record of verifications is held. Because of changes to the contractor scheme, such as the merger, transfer, split, succession, or part succession of the contractor scheme, the record of verifications of the subcontractors may(or may not) transfer across to the new contractor scheme depending on the situation.Where they do not transfer across, it will be necessary for the contractor to re-verify those subcontractors against the current contractor scheme.

Mergers

Where one contractor PAYE scheme has been merged into another contractor scheme by the Employers Section, the verifications of current subcontractors associated with the old PAYE contractor scheme will be transferred automatically to the new ‘merged to’ contractor scheme. It will not be necessary for the contractor to re-verify these subcontractors against the new contractor scheme. However, any new subcontractors engaged after the merger of the contractor schemes must take place against the new ‘merged to’ scheme.

This process may take up to seven days before CIS is displaying the correct information with the verifications from the old contractor scheme being transferred over to the ‘merged to’ contractor scheme.

Transfers

Where the contractor PAYE scheme is transferred from one Area office to another Area office following (say) a change of business address of the contractor. The verifications of current subcontractors associated with the old PAYE contractor scheme will be transferred automatically to the new contractor scheme held by the new Area office.However, any new subcontractors engaged after the transfer of the contractor scheme to the new Area office must take place against the new contractor scheme reference.

Split schemes

Where an existing contractor PAYE scheme is split into the existing contractor scheme,and a new contractor scheme, those subcontractors who were verified under the old contractor scheme, will not automatically have their verifications transferred across tothe new contractor scheme. However, if the contractor provides a list of the subcontractors affected, HMRC can re-create those verifications against the new contractor scheme by using the Verify Subcontractor function without applying the normal rigour of the Contractor supplying the Name, NINO (National Insurance Number) and SA or COTAX UTR of the Subcontractor.

Provided both schemes are still valid/active at the time of the contact, verification of new subcontractor records and payment status can take place against whichever scheme details are quoted and are relevant to the subcontractor.

Successions

Where an existing PAYE contractor scheme is taken over in its entirety by a new proprietor, the contractor will need to re-verify all existing subcontractors as the old contractor scheme is treated as having ceased. A new contractor scheme is opened for the business and all verifications for both existing and new subcontractors must take place against that new contractor scheme reference.

Part Successions

Where an existing PAYE contractor scheme is taken over partly by a new proprietor, the contractor will need to re-verify all existing subcontractors as the old contractor scheme is treated as having ceased. A new contractor scheme is opened for the new business and all verifications for both existing and new subcontractors must take place against that new contractor scheme reference. However see CISR51080 where the only change in the business is the admission of a partner, or in the case of a partnership, a partner leaving and the business becoming a sole trader, but essentially it is still the same business that is continuing to trade.