Finance Act 2004

61Deductions on account of tax from contract paymentsU.K.

(1)On making a contract payment the contractor (see section 57(3)) must deduct from it a sum equal to the relevant percentage of so much of the payment as is not shown to represent the direct cost to [F1the sub-contractor] of materials used or to be used in carrying out the construction operations to which the contract under which the payment is to be made relates.

(2)In subsection (1) “the relevant percentage” means such percentage as the Treasury may by order determine.

(3)That percentage must not exceed—

(a)if the person for whose labour (or for whose employees' or officers' labour) the payment in question is made is registered for payment under deduction, the percentage which is the basic rate for the year of assessment in which the payment is made, or

(b)if that person is not so registered, the percentage which is the higher rate for that year of assessment.

[F2(4)Subsection (5) applies where the contractor is a person falling within section 59(1)(l).

(5)An officer of Revenue and Customs may, if the officer considers it appropriate to do so, by notice in writing—

(a)exempt the contractor from the requirement to deduct sums from contract payments under subsection (1) for a specified period;

(b)treat the contractor as if such an exemption had applied in relation to—

(i)specified contract payments made before the date of the notice, or

(ii)contract payments made during a specified period before the date of the notice.

(6)The period referred to in subsection (5)(a)—

(a)must not exceed 90 days, but

(b)may be extended by one or more further notices under subsection (5).

(7)In subsection (5) “specified” means specified in the notice.]