Gross Payment Status

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Why do I need Gross Payment Status (GPS)?

GPS lets you receive full payments without tax deductions, boosting cash flow. After consultation in 2023 the Government introduced some changes, below you will find the criteria to gain GPS, and most importantly once you’ve got, how not to lose it!

Changes Introduced in 2023

VAT Compliance: Now, handling your VAT correctly is essential for getting and keeping GPS. This means you’ve got to be spot-on with VAT filings and payments. The government’s adding this to the existing checks for taxes like PAYE and income tax.

Minor VAT Errors: Don’t worry about small mistakes with VAT. Minor slip-ups won’t lead to losing your GPS. This is to make sure that tiny errors don’t have big consequences.

Stricter Measures for Major Non-Compliance: However, if there’s serious tax non-compliance, GPS can be withdrawn quickly. This is to prevent fraud and make sure everyone’s playing by the rules.

How do I apply for Gross Payment Status?

You have to pass a series of tests through the portal, through your government Gateway account. You then log on to the CIS element and there are a number of tests, which you have to pass. You’ll need to show that:

• you’ve paid your tax and National Insurance on time in the past
• your business does construction work (or provides labour for it) in the UK
• your business is run through a bank account

HMRC will then look at your turnover for the last 12 months. Ignoring VAT and the cost of materials, your turnover must be at least:

• £30,000 if you’re a sole trader
• £30,000 for each partner in a partnership, or at least £100,000 for the whole partnership
• £30,000 for each director of a company, or at least £100,000 for the whole company

If your company’s controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.

The important thing to note is that you could be fined if you provide false information, and so could anyone who helps you to make a false registration.

The Loss of Gross Payment Status

This can have a crippling effect on a company’s cashflow and result in:

• Up to 20% of a company’s earnings being held by HMRC.
• Deductions are held until the following financial year
• A significant drop in your credit rating
• A loss of company’s credibility and ability to trade

How Could you Lose Gross Payment Status?

Note that a business will fail the scheduled review if:

• any contractor returns have been late on four or more occasions;
• any one contractor return is over 28 days late;
• any PAYE or CIS payments have been late on four or more occasions;
• any one PAYE or CIS payment is more than 14 days late;
• any self-assessment payment is more than 28 days late;
• any Corporation Tax payment is more than 28 days late, or is outstanding at the date of the review;
• a P35 is still outstanding at the time of the review;
• any self-assessment return (income tax or Corporation Tax is outstanding at the time of the review; or
• any payment of £100 or more due to HMRC is outstanding at the time of the review.

The sheer volume of situations that could give rise to a “scheduled review failure” makes it easy for a business to put its gross payment status at risk – especially as the review process is largely automated. Four or more late contractor returns, for example, will trigger an automatic “ad hoc” review irrespective of when the next scheduled review is due to take place.

Read more on Gross Payment Status – How to get it, and how to lose it!