Specialist Property Tax Planning Services for Landlords and Property Investors 
Changes have been made in regards to contractors operating within the Construction Industry Scheme (CIS) under the gross payment status. These changes have come into effect from 6th April in relation to both businesses already operating under the gross payment status and also businesses looking to apply for this. 
Changes have been made in regards to contractors operating within the Construction Industry Scheme (CIS) under the gross payment status. These changes have come into effect from 6th April in relation to both businesses already operating under the gross payment status and also businesses looking to apply for this. 
 
Typically businesses working within the construction industry will have the CIS tax stopped at either 20% or 30% on payments made to them on qualifying work. The gross payment status means that you aren’t subject to the tax being stopped at source. Businesses may look to apply for this in order to manage their own cashflows rather than tax being with HMRC throughout the year and also simplifies the management of this aspect of tax. 
 
Not all businesses would qualify for achieving this status and now further measures have been put in place for those in or wishing to operate within this status. 
 
Following the initial outline of the changes and further consultations, HMRC have now updated their guidance to cover off these changes. We have detailed below the key items that are changing. 
 
Compliance Test 
 
The previous compliance test required proof that the business: 
had filed and paid tax and national insurance/PAYE on time in the previous 12 months (the compliance test) 
falls under the CIS regime and has a bank account (the business test) 
would be reviewed by HMRC for the past 12 months, with turnover of at least £30k if a sole trader, partnership/per partner or company (the turnover test). 
 
The new additional test for the compliance, now relates to VAT compliance. 
 
To qualify the contractor will need to ensure that their VAT returns are filed and paid on time in order to meet this new status test. There is some leniency to the tests, without there being an automatic removal from the scheme for minor non-compliance, which broadly falls into two areas: 
 
The contractor can file up to three late submissions of VAT returns but only if no more than 28 days late, or 
the contractor can make a late payment but only where the VAT liability is less than £100 and paid no more than 14 days late. 
 
If a business is aware that their compliance is not up to date then action should be taken to reduce the risk of the status being removed. 
 
As already mentioned, these changes came into effect from 6th April 2024. For new applicants, HMRC will be assessing the 12 months prior to your application for these compliance tests, and with existing businesses within the scheme the emphasis is ensuring that your compliance remains up to date across these four key compliance areas. 
 
HMRC will be reviewing gross payment status of contractors on a 12 month basis, with new applicants being assessed initially after 6 months before falling in line with an annual review. 
 
If you aren’t sure how this affects you are concerned that your compliance isn’t up to date which may affect your ability to operate under gross payment status, please reach out to us below. 
 
📞 01249 816810 
 
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