Finance Bill

House of Commons

Session 2003 - 04
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
67

Registration of sub-contractors
63
Registration for gross payment or for payment under deduction
(1)
If the Board of Inland Revenue are satisfied, on the application of an individual
or a company, that the applicant has provided—
(a)
such documents, records and information as may be required by or in
5
accordance with regulations made by the Board, and
(b)
such additional documents, records and information as may be
required by the Inland Revenue in connection with the application,

the Board must register the individual or company under this section.
(2)
If the Board are satisfied that the requirements of subsection (2), (3) or (4) of
10
section 64 are met, the Board must register—
(a)
the individual or company, or
(b)
in a case falling within subsection (3) of that section, the individual or
company as a partner in the firm in question,

for gross payment.
15
(3)
In any other case, the Board must register the individual or company for
payment under deduction.
64
Requirements for registration for gross payment
(1)
This section sets out the requirements (in addition to that in subsection (1) of
section 63) for an applicant to be registered for gross payment.
20
(2)
Where the application is for the registration for gross payment of an individual
(otherwise than as a partner in a firm), he must satisfy the conditions in Part 1
of Schedule 11 to this Act.
(3)
Where the application is for the registration for gross payment of an individual
or a company as a partner in a firm—
25
(a)
the applicant must satisfy the conditions in Part 1 of Schedule 11 to this
Act (if an individual) or Part 3 of that Schedule (if a company), and
(b)
in either case, the firm itself must satisfy the conditions in Part 2 of that
Schedule.
(4)
Where the application is for the registration for gross payment of a company
30
(otherwise than as a partner in a firm)—
(a)
the company must satisfy the conditions in Part 3 of Schedule 11 to this
Act, and
(b)
if the Board of Inland Revenue have given a direction under subsection
(5), each of the persons to whom any of the conditions in Part 1 of that
35
Schedule applies in accordance with the direction must satisfy the
conditions which so apply to him.
(5)
Where the applicant is a company, the Board may direct that the conditions in
Part 1 of Schedule 11 to this Act or such of them as are specified in the direction
shall apply to—
40
(a)
the directors of the company,
(b)
if the company is a close company, the persons who are the beneficial
owners of shares in the company, or
(c)
such of those directors or persons as are so specified,

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
68


as if each of them were an applicant for registration for gross payment.
(6)
See also section 65(1) (power of Board to make direction under subsection (5)
on change in control of company applying for registration etc).
(7)
In subsection (5) “director” has the meaning given by section 67 of the Income
Tax (Earnings and Pensions) Act 2003 (c. 1).
5
65
Change in control of company registered for gross payment
(1)
Where it appears to the Board of Inland Revenue that there has been a change
in the control of a company—
(a)
registered for gross payment, or
(b)
applying to be so registered,
10

the Board may make a direction under section 64(5).
(2)
The Board may make regulations requiring the furnishing of information with
respect to changes in the control of a company—
(a)
registered for gross payment, or
(b)
applying to be so registered.
15
(3)
Section 840 of the Taxes Act 1988 (control) applies for the purposes of this
section.
66
Cancellation of registration for gross payment
(1)
The Board of Inland Revenue may at any time make a determination cancelling
a person’s registration for gross payment if it appears to them that—
20
(a)
if an application to register the person for gross payment were to be
made at that time, the Board would refuse so to register him,
(b)
he has made an incorrect return or provided incorrect information
(whether as a contractor or as a sub-contractor) under any provision of
this Chapter or of regulations made under it, or
25
(c)
he has failed to comply (whether as a contractor or as a sub-contractor)
with any such provision.
(2)
Where the Board make a determination under subsection (1), the person’s
registration for gross payment is cancelled with effect from the end of a
prescribed period after the making of the determination (but see section 67(5)).
30
(3)
The Board of Inland Revenue may at any time make a determination cancelling
a person’s registration for gross payment if they have reasonable grounds to
suspect that the person—
(a)
became registered for gross payment on the basis of information which
was false,
35
(b)
has fraudulently made an incorrect return or provided incorrect
information (whether as a contractor or as a sub-contractor) under any
provision of this Chapter or of regulations made under it, or
(c)
has knowingly failed to comply (whether as a contractor or as a sub-
contractor) with any such provision.
40
(4)
Where the Board make a determination under subsection (3), the person’s
registration for gross payment is cancelled with immediate effect.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
69

(5)
On making a determination under this section cancelling a person’s
registration for gross payment, the Board must without delay give the person
notice stating the reasons for the cancellation.
(6)
Where a person’s registration for gross payment is cancelled by virtue of a
determination under subsection (1), the person must be registered for payment
5
under deduction.
(7)
Where a person’s registration for gross payment is cancelled by virtue of a
determination under subsection (3), the person may, if the Board thinks fit, be
registered for payment under deduction.
(8)
A person whose registration for gross payment is cancelled under this section
10
may not, within the period of one year after the cancellation takes effect (see
subsections (2) and (4) and section 67(5)), apply for registration for gross
payment.
(9)
In this section “a prescribed period” means a period prescribed by regulations
made by the Board.
15
67
Registration for gross payment: appeals
(1)
A person aggrieved by—
(a)
the refusal of an application for registration for gross payment, or
(b)
the cancellation of his registration for gross payment,

may by notice appeal to the General Commissioners or, if the person so elects
20
in the notice, to the Special Commissioners.
(2)
The notice must be given to the Board of Inland Revenue within 30 days after
the refusal or cancellation.
(3)
The notice must state the person’s reasons for believing that—
(a)
the application should not have been refused, or
25
(b)
his registration for gross payment should not have been cancelled.
(4)
The jurisdiction of the Commissioners on such an appeal shall include
jurisdiction to review any relevant decision taken by the Board of Inland
Revenue in the exercise of their functions under section 63, 64, 65 or 66.
(5)
Where a person appeals against the cancellation of his registration for gross
30
payment by virtue of a determination under section 66(1), the cancellation of
his registration does not take effect until whichever is the latest of the
following—
(a)
the abandonment of the appeal,
(b)
the determination of the appeal by the Commissioners, or
35
(c)
the determination of the appeal by the High Court.
68
Registration for payment under deduction: cancellation and appeals
The Board of Inland Revenue may make regulations providing for—
(a)
the cancellation, in such circumstances as may be prescribed by the
regulations, of a person’s registration for payment under deduction;
40
(b)
appeals against a refusal to register a person for payment under
deduction or the cancellation of such registration.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
70

Verification, returns etc and penalties
69
Verification etc of registration status of sub-contractors
(1)
The Board of Inland Revenue may make regulations requiring persons who
make payments under contracts relating to construction operations, except in
prescribed circumstances, to verify with the Board whether a person to whom
5
they are proposing to make—
(a)
a contract payment, or
(b)
a payment which would be a contract payment but for section 60(4),

is registered for gross payment or for payment under deduction.
(2)
The provision that may be made by regulations under subsection (1) includes
10
provision—
(a)
for preventing a person from verifying unless such conditions as may
be prescribed have been satisfied;
(b)
as to the period for which the verification remains valid.
(3)
The Board of Inland Revenue may make regulations requiring the Board to
15
notify persons of a prescribed description who make payments under contracts
relating to construction operations that—
(a)
a person registered for gross payment has become registered for
payment under deduction or has ceased to be registered under section
63, or
20
(b)
a person registered for payment under deduction has become
registered for gross payment or has ceased to be registered under
section 63.
(4)
The provision that may be made by regulations under subsection (1) or (3)
includes provision for a person to be entitled to assume, except in prescribed
25
circumstances, that—
(a)
a person verified or notified as being registered for gross payment, or
(b)
a person verified or notified as being registered for payment under
deduction,

has not subsequently ceased to be so registered.
30
(5)
In this section “prescribed” means prescribed by regulations under this section.
70
Periodic returns by contractors etc
(1)
The Board of Inland Revenue may make regulations requiring persons who
make payments under construction contracts—
(a)
to make to the Board, at such times and in respect of such periods as
35
may be prescribed, returns relating to such payments;
(b)
to keep such records as may be prescribed relating to such payments;
(c)
to provide such information as may be prescribed, at such times as may
be prescribed, to persons to whom such payments are made or to such
of those persons as are of a prescribed description.
40
(2)
The provision that may be made by regulations under subsection (1)(a)
includes provision requiring, except in such circumstances as may be
prescribed,—
(a)
the person making a return to declare in the return that none of the
contracts to which the return relates is a contract of employment;
45

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
71

(b)
the person making a return to declare in the return that, in the case of
each person to whom a payment to which the return relates is made, he
has complied with the requirements of any regulations made under
section 69(1) (verification of registration status);
(c)
returns to contain such other information and to be in such form as may
5
be prescribed;
(d)
a return to be made where no payments have been made in the period
to which the return relates.
(3)
The Board of Inland Revenue may make regulations with respect to—
(a)
the production, copying and removal of, and the making of extracts
10
from, any records kept by virtue of any such requirement as is referred
to in subsection (1)(b), and
(b)
rights of access to, or copies of, any such records which are removed.
(4)
Regulations under this section may make provision—
(a)
for or in connection with enabling a person who makes payments
15
under construction contracts to appoint another person (a “scheme
representative”) to act on his behalf in connection with any
requirements imposed on him by regulations under this section, and
(b)
as to the rights, obligations or liabilities of scheme representatives.
(5)
In this section “prescribed” means prescribed by regulations under this section.
20
71
Collection and recovery of sums to be deducted
(1)
The Board of Inland Revenue must make regulations with respect to the
collection and recovery, whether by assessment or otherwise, of sums required
to be deducted from any payments under section 61.
(2)
The regulations may include any matters with respect to which PAYE
25
regulations may be made.
(3)
Interest required to be paid by the regulations—
(a)
is to be paid without any deduction of income tax, and
(b)
is not to be taken into account in computing any income, profits or
losses for any tax purposes.
30
72
Penalties
If a person, for the purpose of becoming registered for gross payment or for
payment under deduction,—
(a)
makes any statement, or furnishes any document, which he knows to
be false in a material particular, or
35
(b)
recklessly makes any statement, or furnishes any document, which is
false in a material particular,
he shall be liable to a penalty not exceeding £3,000.
Supplementary
73
Regulations under this Chapter: supplementary
40
(1)
The Board of Inland Revenue may by regulations make such other provision
for giving effect to this Chapter as they consider necessary or expedient.

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Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
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(2)
The provision that may be made by regulations under subsection (1) includes
provision for or in connection with modifying the application of this Chapter
in circumstances where—
(a)
a person acts as the agent of a contractor or sub-contractor;
(b)
a person’s right to payments under a construction contract is assigned
5
or otherwise transferred to another person.
(3)
Regulations under this Chapter may make different provision for different
cases.
(4)
Any power under this Chapter to make regulations authorising or requiring a
document (whether or not of a particular description), or any records or
10
information, to be given or requested by or to be sent or produced to the Board
of Inland Revenue includes power—
(a)
to authorise the Board to nominate a person who is not an officer of the
Board to be the person who on behalf of the Board—
(i)
gives or requests the document, records or information; or
15
(ii)
is the recipient of the document, records or information; and
(b)
to require the document, records or information, in cases prescribed by
or determined under the regulations, to be sent or produced to the
address (determined in accordance with the regulations) of the person
nominated by the Board to receive it on their behalf.
20
74
Meaning of “construction operations”
(1)
In this Chapter “construction operations” means operations of a description
specified in subsection (2), not being operations of a description specified in
subsection (3); and references to construction operations—
(a)
except where the context otherwise requires, include references to the
25
work of individuals participating in the carrying out of such
operations; and
(b)
do not include references to operations carried out or to be carried out
otherwise than in the United Kingdom (or the territorial sea of the
United Kingdom).
30
(2)
The following operations are, subject to subsection (3), construction operations
for the purposes of this Chapter—
(a)
construction, alteration, repair, extension, demolition or dismantling of
buildings or structures (whether permanent or not), including offshore
installations;
35
(b)
construction, alteration, repair, extension or demolition of any works
forming, or to form, part of the land, including (in particular) walls,
roadworks, power-lines, electronic communications apparatus, aircraft
runways, docks and harbours, railways, inland waterways, pipe-lines,
reservoirs, water-mains, wells, sewers, industrial plant and
40
installations for purposes of land drainage, coast protection or defence;
(c)
installation in any building or structure of systems of heating, lighting,
air-conditioning, ventilation, power supply, drainage, sanitation, water
supply or fire protection;
(d)
internal cleaning of buildings and structures, so far as carried out in the
45
course of their construction, alteration, repair, extension or restoration;
(e)
painting or decorating the internal or external surfaces of any building
or structure;

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Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
73

(f)
operations which form an integral part of, or are preparatory to, or are
for rendering complete, such operations as are previously described in
this subsection, including site clearance, earth-moving, excavation,
tunnelling and boring, laying of foundations, erection of scaffolding,
site restoration, landscaping and the provision of roadways and other
5
access works.
(3)
The following operations are not construction operations for the purposes of
this Chapter—
(a)
drilling for, or extraction of, oil or natural gas;
(b)
extraction (whether by underground or surface working) of minerals
10
and tunnelling or boring, or construction of underground works, for
this purpose;
(c)
manufacture of building or engineering components or equipment,
materials, plant or machinery, or delivery of any of these things to site;
(d)
manufacture of components for systems of heating, lighting, air-
15
conditioning, ventilation, power supply, drainage, sanitation, water
supply or fire protection, or delivery of any of these things to site;
(e)
the professional work of architects or surveyors, or of consultants in
building, engineering, interior or exterior decoration or in the laying-
out of landscape;
20
(f)
the making, installation and repair of artistic works, being sculptures,
murals and other works which are wholly artistic in nature;
(g)
signwriting and erecting, installing and repairing signboards and
advertisements;
(h)
the installation of seating, blinds and shutters;
25
(i)
the installation of security systems, including burglar alarms, closed
circuit television and public address systems.
(4)
The Treasury may by order made by statutory instrument amend either or both
of subsections (2) and (3) by—
(a)
adding,
30
(b)
varying, or
(c)
removing,

any description of operations.
(5)
No statutory instrument containing an order under subsection (4) shall be
made unless a draft of the instrument has been laid before and approved by a
35
resolution of the House of Commons.
75
Meaning of “the Inland Revenue” etc and delegation of Board’s functions
(1)
In this Chapter “the Inland Revenue” means any officer of the Board of Inland
Revenue.
(2)
In this Chapter “the Board of Inland Revenue” means the Commissioners of
40
Inland Revenue (as to which, see in particular the Inland Revenue Regulation
Act 1890 (c. 21)).
(3)
The Board of Inland Revenue may make regulations providing for any of the
following to be done on behalf of the Board—
(a)
the registration of persons under section 63;
45
(b)
the giving of directions under section 64(5); and