How do I obtain gross payment status?
The rules for obtaining Gross Payment Status within HMRC’s CIS were simplified in 2016, but sub-contractors working in the construction industry must still jump through a number of hoops in order to be paid gross by their construction industry contractors. A business has to prove that it is involved in construction operations, satisfy HMRC that its “construction turnover” exceeds £30,000 for a sole trader or £30,000 per partner or director for firms and limited companies, and must be able to prove that all tax returns and payments are up to date.
Gaining gross payment status is, however, only part of the story. HMRC conduct regular checks that ensures a business remains qualified to hold gross payment status. These “scheduled reviews” take place automatically at least once in any twelve month period. HMRC’s guidance to subcontractors is somewhat vague as to the nature of the scheduled review and gives no detail of the circumstances that might lead to a business losing its gross payment status. However, more detailed guidance is contained within the CIS regulations and HMRC’s internal manuals.
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.
