The Income Tax (Construction Industry Scheme) Regulations 2005

Mandatory electronic payment

45

• (1) A contractor who is a large employer within the meaning of regulation 198A (large employers) of the PAYE Regulations must pay the specified payment using an approved method of electronic communications.

• (2) Paragraph (1) applies regardless of whether a payment of tax is due under regulation 68 of the PAYE Regulations (payment and recovery of tax by employer).

• (3) If the Commissioners for Her Majesty’s Revenue and Customs have given directions under regulation 199(3) of the PAYE Regulations in relation to a contractor, the specified payment must be made in accordance with those directions.

• (4) A specified payment is not treated as received in full by Her Majesty’s Revenue and Customs on or before the date by which that specified payment is required in accordance with regulation 7 unless it is made in a manner which secures (in a case where the specified payment is made otherwise than in cash) that, on or before that date, all transactions can be completed which need to be completed before the whole amount of the specified payment becomes available to the Commissioners for Her Majesty’s Revenue and Customs.

Contractor in default if specified payment not received by applicable due date

46

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Default notice and appeal

47

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Default surcharge

48

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Surcharge notice and appeal

49

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PART 8 — SUPPLEMENTARY PROVISIONS

Delegation of Commissioners for Her Majesty’s Revenue and Customs' functions

50

• (1) The following may be done by an officer of Revenue and Customs on behalf of the Commissioners for Her Majesty’s Revenue and Customs—

• (a) the registration of persons under section 63 of the Act (registration for gross payment or payment under deduction);

• (b) the giving of directions under section 64(5) of the Act (power to make directions as to application of conditions to be satisfied by individuals applying for registration for gross payment);

• (c) the cancellation under section 66 of the Act of a person’s registration for gross payment.

• (2) This regulation is without prejudice to any other power of the Commissioners for Her Majesty’s Revenue and Customs to delegate their functions

Inspection of records of contractors and sub-contractors

51

• (1) Whenever required to do so by a person nominated by the Commissioners for Her Majesty’s Revenue and Customs, a contractor must produce to that person all contractor records, or such contractor records as may be specified by that person, for inspection at the prescribed place and at such time as that person may reasonably require.

• (2) “Contractor records” means all documents and records relating to—

• (a) the calculation and payment of sums paid by the contractor to sub-contractors (or their nominees) under contracts relating to construction operations, and

• (b) the deductions made from such sums required under section 61 of the Act,

in the tax years or tax periods specified by the nominated person.

• (3) Whenever required to do so by a person nominated by the Commissioners for Her Majesty’s Revenue and Customs, a person who is or has within the preceding three tax years been a sub-contractor must produce to that person all sub-contractor records, or such sub-contractor records as may be specified by that person, for inspection at the prescribed place and at such time as that person may reasonably require.

• (4) “Sub-contractor records” means all documents and records relating to—

• (a) the calculation or payment of sums paid to the sub-contractor pursuant to any contract relating to construction operations under which he is or was a sub-contractor within the previous three years, and

• (b) the direct cost of materials relating to any such contract.

• (5) “The prescribed place” means such place in the United Kingdom as the contractor or sub-contractor and the nominated person may agree upon, or in the absence of agreement—

• (a) the place in the United Kingdom at which the contractor records or sub-contractor records are normally kept, or

• (b) if there is no such place, the contractor’s or sub-contractor’s principal place of business in the United Kingdom.

• (6) The nominated person may—

• (a) take copies of, or make extracts from, any document produced for inspection in accordance with paragraph (1) or (3);

• (b) remove any document so produced if it appears to the nominated person to be necessary to do so, at a reasonable time and for a reasonable period.

• (7) If any document is removed in accordance with paragraph (6)(b), the nominated person must provide—

• (a) a receipt for the document, and

• (b) a copy of the document, free of charge, to the person by whom it was produced or caused to be produced, within seven days of that person requesting a copy, if the document is reasonably required for the proper conduct of a business.

• (8) If a lien is claimed on a document produced in accordance with paragraph (1) or (3), the removal of the document under paragraph (6)(b) is not to be regarded as breaking the lien.

• (9) If records are maintained by computer, the person required to make them available for inspection must provide the nominated person with all facilities necessary for obtaining information from them.

• (10) For the purposes of this regulation, a contractor and a sub-contractor must keep, for not less than three years after the end of the tax year to which they relate, all contractor records or sub-contractor records as the case may be which are not required to be sent to the Commissioners for Her Majesty’s Revenue and Customs by other provisions of these Regulations.

Inspection of records of sub-contractors – additional provisions

52

• (1) Where a sum deducted under section 61 of the Act is treated as paid on account of the liabilities mentioned in regulation 56(2) (application by Commissioners for Her Majesty’s Revenue and Customs of sums deducted under section 61), the sub-contractor, whose liabilities they are, shall—

• (a) maintain the records specified in paragraph (2), and

• (b) produce to a person nominated by the Commissioners for Her Majesty’s Revenue and Customs for inspection those records, or such of them as may be specified by him, at such time as he may reasonably require, at the prescribed place.

• (2) The records are all documents and records relating to the calculation of—

• (a) the amounts which the sub-contractor would have been liable to pay to the Commissioners for Her Majesty’s Revenue and Customs in the preceding three tax years, under the provisions mentioned in regulation 56(2), but for the withholding by a contractor of sums due to him; and

• (b) the amounts deducted by a contractor under section 61 of the Act which the sub-contractor claims to be entitled to set off against those liabilities.

• (3) “The prescribed place” means such place in the United Kingdom as the sub-contractor and the nominated person may agree upon, or in the absence of agreement—

• (a) the place in the United Kingdom at which the documents and records mentioned in paragraph (2) are normally kept, or

• (b) if there is no such place, the sub-contractor’s principal place of business in the United Kingdom.

• (4) The nominated person may—

• (a) take copies of, or make extracts from, any document produced for inspection in accordance with paragraph (1)(b);

• (b) remove any document so produced if it appears to the nominated person to be necessary to do so, at a reasonable time and for a reasonable period.

• (5) If a lien is claimed on a document produced in accordance with paragraph (1)(b), the removal of the document under paragraph (4)(b) is not to be regarded as breaking the lien.

• (6) If records are maintained by computer, the person required to make them available for inspection must provide the nominated person with all facilities necessary for obtaining information from them.

Information as to change of control of close company

53

• (1) This regulation applies to a company which—

• (a) is a close company,

• (b) is a private company limited by shares, and

• (c) is registered for gross payment or is applying to be so registered.

• (2) Where there is a change in the control of the company by reason of an issue or transfer of shares in the company to a person who was not a shareholder in the company immediately before the issue or transfer, the company shall, within 30 days of the issue or of receiving information as to the transfer, give notice to the Commissioners for Her Majesty’s Revenue and Customs of the name and address of the person to whom the shares were issued or transferred.

• (3) In this regulation “control” has the same meaning as in section 840 of ICTA.

Death of contractor

54

If a contractor dies, anything which he would have been liable to do under these Regulations must be done by his personal representatives.

Service by post

55

Any notice which is authorised or required to be given, served or issued under these Regulations may be sent by post.

Application by the Commissioners for Her Majesty’s Revenue and Customs of sums deducted under section 61

56

• (1) This regulation applies to sums deducted from contract payments made to a sub-contractor which is a company (“the qualifying sub-contractor”).

• (2) So much of any sum deducted under section 61 of the Act by a contractor in a tax year and paid to the Commissioners for Her Majesty’s Revenue and Customs as is required shall be applied—

• (a) first, in discharge of any liability of the qualifying sub-contractor to account for primary Class 1 contributions in respect of earnings paid to its employees in that year;

• (b) second, in discharge of any liability of the qualifying sub-contractor for secondary Class 1 contributions in respect of earnings paid to its employees in that year;

• (c) third, in discharge of any liability of the qualifying sub-contractor to account for tax deducted from the emoluments of its employees in accordance with Regulations made under section 684 of ITEPA (pay as you earn) in respect of that year;

• (d) fourth, in discharge of any liability of the qualifying sub-contractor to account for deductions made by it in that year from the emoluments of its employees in accordance with regulations made under section 22(5) of the Teaching and Higher Education Act 1998¹⁴⁹, section 73B of the Education (Scotland) Act 1980¹⁵⁰, or Article 3(5) of the Education (Student Support) (Northern Ireland) Order 1998¹⁵¹;

• (e) fifth, in discharge of any liability of the qualifying sub-contractor to refund to the Commissioners for Her Majesty’s Revenue and Customs any funding payment made by them in respect of statutory sick pay, statutory maternity pay, ordinary statutory paternity pay, additional statutory paternity pay or statutory adoption pay under the relevant recovery provision; and

• (f) last, in discharge of any liability of the qualifying sub-contractor to account for sums deducted by it (in its capacity as a contractor) under section 61 of the Act from payments made to other sub-contractors.

• (3) So much of any sum deducted under section 61 of the Act as is not required to discharge the sub-contractor’s liabilities specified in paragraph (2) shall be repaid to the qualifying sub-contractor.

Certificate that sum due

57

• (1) A certificate of an officer of Revenue and Customs that, to the best of his knowledge and belief, any amount shown in a certificate under the regulations listed in paragraph (2) has not been paid by a contractor, is sufficient evidence that the amount mentioned in the certificate is unpaid and due to the Crown.

• (2) The regulations are—

• regulation 10(6) (return and certificate if amount may be unpaid)

• regulation 11(8) (notice and certificate if amount may be unpaid)

• regulation 12(2) (certificate after inspection of records).

• (2A) An officer of Revenue and Customs may prepare a certificate showing the whole or part of a combined amount which includes deductions under section 61 of the Act without specifying the components of the combined amount.

Paragraph (1) shall apply with any necessary modifications to the certificate.

• (3) A certificate of an officer of Revenue and Customs that, to the best of his knowledge and belief, any amount of interest payable under ... regulation 14 (interest on amounts overdue) has not been paid by a contractor, is sufficient evidence that the amount mentioned in the certificate is unpaid and due to the Crown.

• (3A) An officer of Revenue and Customs may prepare a certificate showing the total amount of interest payable in respect of the whole or any component of the combined amount without specifying which component of the combined amount the interest relates to.

Paragraph (3) shall apply with any necessary modifications to the certificate.

• (4) The production of—

• (a) the return made by the contractor under regulation 10(4), and

• (b) the certificate of an officer of Revenue and Customs under regulation 10(6),

is sufficient evidence that the amount shown in the certificate is the amount of tax which the contractor is liable to pay to the Commissioners for Her Majesty’s Revenue and Customs in respect of the tax period in question.

• (5) A document which purports to be a certificate under this regulation is treated as such a certificate until the contrary is proved.

Payment by cheque

58

• (1) For the purposes of the following provisions, if—

• (a) any payment to the Commissioners for Her Majesty’s Revenue and Customs is made by cheque, and

• (b) the cheque is paid on its first presentation to the banker on whom it is drawn,

the payment shall be treated as made on the day which the cheque was received by the Commissioners for Her Majesty’s Revenue and Customs.

• (2) The provisions are—

• regulation 7 payment, due date for payment of amounts deducted and receipts for payment of tax

• regulation 9 recovery from sub-contractor of tax not deducted by contractor

• regulation 11 notice and certificate if tax may be unpaid

• regulation 14 interest on amounts overdue

Appeals: supplementary provisions

59

• (1) Section 31A(5) and (6) of TMA applies to appeals under regulation 47 (default notice and appeal) as it applies to an appeal under section 31 of that Act.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transitional provisions, savings and revocation

60

• (1) Schedule 1 (transitional provisions and savings) has effect.

• (2) The Regulations listed in column 1 of Schedule 2 are revoked to the extent specified in column 3 of that Schedule.

• (3) Paragraph (2) is subject to Schedule 1.

SCHEDULE 1 — TRANSITIONAL PROVISIONS AND SAVINGS

PART 1 — GENERAL PROVISIONS

Continuity of the law

1

The revocation of provisions and their making in a rewritten form in these Regulations does not affect the continuity of the law.

2

Paragraph 1 does not apply to any change in the law made by these Regulations.

3

Anything which—

• (a) has been done, or has effect as if done, under or for the purposes of a provision of the revoked Regulations, and

• (b) is in force or effective immediately before the commencement of these Regulations,

has effect after that commencement as if done under or for the purposes of the corresponding provision of these Regulations.

4

Any reference (express or implied) in these Regulations or any document made under these Regulations to—

• (a) a provision of these Regulations, or

• (b) things done or falling to be done under or for the purposes of a provision of these Regulations,

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding provision of the revoked Regulations had effect, a reference to the provision of the revoked Regulations or to things done or falling to be done under or for the purposes of the provision of the revoked Regulations.

5

Any reference (express or implied) in these Regulations to—

• (a) a provision of the Act, or

• (b) things done or falling to be done under or for the purposes of a provision of the Act,

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding provision repealed by the Act had effect, a reference to the repealed provision or to things done or falling to be done under or for the purposes of the repealed provision.

6

Any reference (express or implied) in these Regulations to contractors, sub-contractors, construction operations or similar concepts created by the Act is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding concept which has been superseded by the Act had effect, a reference to the superseded concept.

7

Paragraphs 4, 5 and 6 apply only in so far as the context permits.

8

Paragraph 6 is without prejudice to the generality of paragraph 5.

9

These Regulations have effect in relation to sums liable, under the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993¹⁵⁶, to be deducted or accounted for in respect of payments made before the appointed day as if the sum had been liable to be deducted or accounted for under these Regulations.

10

Paragraph 9 is without prejudice to the generality of paragraphs 1 to 8.

11

Paragraphs 1 to 10 have effect instead of paragraph (b) of section 17(2) of the Interpretation Act 1978¹⁵⁷.

General saving for old savings

12

• (1) The revocation by these Regulations of a provision previously revoked subject to savings does not affect the continued operation of those savings.

• (2) The revocation by these Regulations of a saving on the previous revocation of a provision does not affect the operation of the saving in so far as it is not specifically reproduced in these Regulations but remains capable of having effect.

Interpretation

13

In this Part of this Schedule, “the revoked Regulations” means the Regulations which are revoked by these Regulations.

PART 2 — SPECIFIC PROVISIONS

Interest on unpaid amounts: disapplication of regulation 14 for tax years before the tax year ending 5th April 1993

1

Regulation 14 (interest on amounts overdue) does not apply in relation to unpaid amounts in respect of a tax year ending on or before 5th April 1992.

Interest on overpaid tax: disapplication of regulation 15 for tax years before the tax year ending 5th April 1993

2

Regulation 15 (interest on overpaid amount) does not apply to tax which was paid by an employer in respect of a tax year ending on or before 5th April 1993.

SCHEDULE 2 — REVOCATIONS

1. Regulations revoked	2. Reference	3. Extent of revocation
The Income Tax (Sub-contractors in the Construction Industry) Regulations 1993	1993/743	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 1995	1995/217	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment No. 2) Regulations 1995	1995/448	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 1996	1996/981	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 1998	1998/2622	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 1999	1999/825	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment No. 2) Regulations 1999	1999/2159	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 2000	2000/1151	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment No. 2) Regulations 2000	2000/1880	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry and Employments) (Amendment) Regulations 2000	2000/2742	The whole instrument to the extent not already revoked158.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 2001	2001/1531	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 2002	2002/2225	The whole instrument.
The Income Tax (Sub-contractors in the Construction Industry and Employments) (Amendment) Regulations 2003	2003/536	The whole instrument to the extent not already revoked159.
The Income Tax (Sub-contractors in the Construction Industry) (Amendment) Regulations 2004	2004/1075	The whole instrument.

Signed

David Varney — Helen Ghosh — Two of the Commissioners for Her Majesty’s Revenue and Customs — 25th July 2005

Editorial notes

Explanatory note

(This note is not part of the Regulations)

These Regulations make provisions in relation to the construction industry scheme established by Chapter 3 of the Finance Act 2004 (c. 12) (“the Act”).

Part 1 (introduction) contains regulations 1 and 2, this is introductory and provides the definition of terms the regulations use.

Part 2 (contractors) contains regulation 3 to 6 which deal with contractors. This Part makes provisions for multiple contractor elections whereby a contractor may elect to be treated as a different contractor in relation to different groups of sub-contractors. Provision is also made requiring a contractor to make a monthly return in relation to all payments made to sub-contractors in that month, the appointment of a scheme representative to act on a contractor’s behalf, and the verification by a contractor of a sub-contractor’s registration status to determine whether to make payments gross or net.

Part 3 (payment and recovery of amounts deducted under section 61) contains regulations 7 to 17. These make provisions in relation to payments by contractors of amounts deducted from contract payments on account of tax in accordance with section 61 of the Act, provisions in relation to and recovery of unpaid amounts, repayment of over-payments and interest on amounts overdue and amounts overpaid.

Part 4 (payments excepted from section 60) contains regulations 18 to 24 which make provisions excepting certain payments from the definition of contract payment within section 60 of the Act. The exceptions are for small payments, payments in relation to work carried out on land owned by the person to whom the payment is made, reverse premiums, payments made as agent of a local education authority, payments made in respect of property used for the purposes of the business of the person making the payment, payments made by charities and by public bodies under private finance transactions.

Part 5 (registration of sub-contractors) contains regulations 25 and 26 which make provisions in relation to the registration of sub-contractors for gross payment or for payment under deduction, and for the cancellation of such registration.

Part 6 (conditions to be satisfied for gross payment) contains regulations 27 to 37, these set out the conditions to be satisfied in order for a sub-contractor to be registered for gross payment. Provisions are made in respect of the business test, the turnover test and the compliance test.

Part 7 (electronic communications) contains regulations 38 to 49. These deal with the delivery of information and making payments by electronic means.

Part 8 (supplementary provisions) contains regulations 50 to 60. These make provisions for the delegation of functions by the Commissioners for Her Majesty’s Revenue and Customs, inspection of a contractor’s or sub-contractor’s records, information as to the change of control of a close company, death of a contractor, service of notices by post, application of sums deducted under section 61 of the Act in the discharge of liabilities of the sub-contractor, certificates of sums due, payments by cheque, appeals and saving and revocation of regulations.

Schedule 1 contains general savings in relation to continuity of the law and specific savings in relation to interest on unpaid or overpaid amounts in respect of a tax year ending on or before 5th April 1992, in respect of a tax year ending on or before 5th April 1993 respectively.

Footnotes