The Income Tax (Construction Industry Scheme) (Amendment) and the Corporation Tax (Security for Payments) Regulations 2019

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Income Tax (Construction Industry Scheme) Regulations 2005 (S.I. 2005/2045) (the “2005 Regulations”) to enable Her Majesty’s Revenue and Customs (“HMRC”) to require security or further security for the payment of sums in respect of which a contractor is, or may be, accountable to HMRC under either section 61 of the Finance Act 2004 (ch. 12) (“FA 2004”) or the 2005 Regulations.

These Regulations also enable HMRC to require security or further security for the payment of corporation tax in respect of which a company is, or may become, liable to pay.

Part 1 of the Regulations provides for citation and commencement of the Regulations. The Regulations will come into force on 6th April 2019.

Part 2 of the Regulations inserts a new Part 3A into the 2005 Regulations and makes a consequential amendment to the 2005 Regulations.

Regulation 3 amends the definition of “contractor” in the 2005 Regulations.

Regulation 4 inserts a new Part 3A in to the 2005 Regulations to make provision for payments of security to HMRC. Part 3A provides for an officer of Revenue and Customs to require a person to give security, or further security, in respect of certain amounts that a contractor is or may be accountable to HMRC under section 61 (deductions on account of tax from contract payments) of FA 2004 or the 2005 Regulations. New Part 3A does not apply in relation to the persons named in section 59(1)(b) to (k) of FA 2004. An officer may require security where he or she considers that it is necessary for the protection of the revenue.

New regulation 17C lists the persons from whom security may be required and also makes provision for joint and several liability in cases where security is required from more than one person.

New regulation 17D requires the officer to give notice to a person from whom security is required and specifies the information which must be included in the notice. Regulation 17E prevents the notice from requiring the security on a date that is earlier than the 30^th day after the day on which the notice is given. Regulation 17E also disapplies the requirement to give security by the specified date if, before that date, the contractor makes a request to HMRC to enter into a time to pay arrangement. Regulation 17E further provides that, in the event HMRC does not agree to the contractor’s request, security will be required on the 30^th day after the contractor is notified of that decision.

New regulation 17F makes provision for a person who has given security to apply to an officer of Revenue and Customs for a reduction in the value of security that HMRC holds. Regulation 17G makes provision for the outcome of such an application and permits HMRC to make such arrangements as they think fit where an application under regulation 17F is successful. If an application is made under regulation 17F(1)(a), in circumstances where more than one person has been given notice to provide security under regulation 17C(2)(b), and that application results in a reduction in the value of security held by HMRC, regulation 17H provides that, in certain cases, an officer of Revenue and Customs may require further security in substitution for the original security.

New regulation 17I contains provisions allowing a person from whom security is required to appeal against that requirement, and for a person whose application under regulation 17F(1) is refused (in whole or in part) to appeal against that decision. Together with regulation 17J, it also contains (in part) the procedural requirements and practical arrangements for appeals.

Under section 70A(4) of FA 2004, which was inserted by section 82(1)(b) of Finance Act 2019 (c. 1), it is an offence for a person from whom security is required to fail for a specified period to give security. New regulation 17K specifies the period that applies for that purpose in the different circumstances that might apply.

Part 3 of the Regulations makes similar provision for payments of security to be made to HMRC in respect of corporation tax.

Regulation 5 includes certain definitions that apply to regulations 6 to 14.

Regulation 6 provides for an officer of Revenue and Customs to require a person to give security, or further security, in respect of corporation tax that a company is or may be liable to pay to HMRC. An officer may require security where he or she considers that it is necessary for the protection of the revenue.

Regulation 7 lists the persons from whom security may be required and also makes provision for liability to give security to be joint and several in cases where it is required from more than one person.

Regulation 8 requires the officer to give notice to a person from whom security is required and specifies the information which must be included in the notice. Regulation 9 prevents the notice from requiring the security on a date that is earlier than the 30^th day after the day on which the notice is given.

Regulation 10 makes provision for a person who has given security to apply to an officer of Revenue and Customs for a reduction in the value of security that HMRC holds. Regulation 11 makes provision for the outcome of such an application and permits HMRC to make such arrangements as they think fit where an application under regulation 10 is successful. If an application is made under regulation 10(1)(a), in circumstances where more than one person has been given notice to provide security under regulation 7(2)(b), and that application results in a reduction in the value of security held by HMRC, regulation 12 provides that, in certain cases, an officer of Revenue and Customs may require further security in substitution for the original security.

Regulation 13 contains provisions allowing a person from whom security is required to appeal against that requirement, and for a person whose application under regulation 10(1) is refused (in whole or in part) to appeal against that decision. Regulation 13 also contains (in part) the procedural requirements and practical arrangements for appeals.

Under paragraph 88A(4) of Schedule 18 to the Finance Act 1998 (ch. 36), which was inserted by section 82(2) of Finance Act 2019, it is an offence for a person from whom security is required to fail for a specified period to give security. Regulation 14 specifies the period that applies for that purpose in the different circumstances that might apply.

A Tax Information and Impact Note covering this instrument was published on 6 July 2018 and is available at https://www.gov.uk/government/publications/extension-of-security-deposit-legislation.