The Income Tax (Construction Industry Scheme) (Amendment of Schedule 11 to the Finance Act 2004) Order 2015

EXPLANATORY NOTE

(This note is not part of the Order)

This Order amends Parts 2 and 3 of Schedule 11 to the Finance Act 2004 (c. 12) which set out the conditions which a sub-contractor in the construction industry must satisfy to be registered for payments to be made to it gross (i.e. payments from which there are no deductions under the Construction Industry Scheme). Part 2 sets out the conditions which must be satisfied by a firm where there is an application by an individual or a company to be registered for gross payment as a partner in a firm. Part 3 sets out the conditions that must be satisfied by a company where there is an application for the company to be registered for gross payment.

Regulation 2 amends Part 2 of Schedule 11 by inserting new paragraph 8A, which provides that the compliance test does not need to be met if at the time of the application for gross payment one of the members of the firm is already registered for gross payment, providing that that person has the right to a share of at least half the assets or half the income of that firm. Where two partners together have a right to share in at least half the assets or half the income of the firm then if those two partners are registered for gross payment at the time of the application by the firm, that firm will not have to satisfy the compliance test. Paragraph 8A(2) provides that the reference to registration for gross payment does not include registration by virtue of paragraph 8A or paragraph 12A.

Regulation 3 amends Part 3 of Schedule 11 by inserting new paragraph 12A, which provides that the compliance test in paragraph 12 does not need to be met where two conditions are satisfied. The first is that at the time of the application one of the members is already registered for gross payment. The second condition is that the member possesses or is entitled to acquire at least 50% of the share capital or the voting rights or so much of the share capital or the rights as would on a winding up entitled the member to receive at least 50% of the assets or the amounts available for distribution. Where two members of the company are registered for gross payment and those members together have at least 50% of the share capital or 50% of the voting rights then the company does not have to satisfy the compliance test in paragraph 12. Paragraph 12A(2) provides that the reference to registration for gross payment status does not include registration by virtue of paragraph 8A or paragraph 12A.

A Tax Information and Impact Note covering this instrument was published on 10th December 2014 alongside a draft of this instrument and is available at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.