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Changes to the Construction Industry Scheme

Finance Bill 2023-24, which is currently making its way through Parliament, includes a clause that will change the Construction Industry Scheme (CIS) Gross Payment Status Tests from 6th April 2024.

Having Gross Payment Status means that a subcontractor can receive gross payments from contractors, as opposed to payments that have suffered a 20% or 30% deduction. The deductions are forwarded to HMRC and are used to offset the subcontractor’s tax and NIC bills.

Under the current rules, to achieve Gross Payment Status, a subcontractor must prove they meet the following three criteria:

  • The business carries out construction or provides construction labour through a UK bank account.
  • Turnover is over certain limits (£30,000 for a sole trader. For partnerships and companies, either £30,000 for each partner/director or over £100,000 for the entire partnership/company).
  • Tax returns have been filed on time and the taxes due paid on time in the past. 

The key proposed change will add VAT returns and payments to the list of taxes that are considered for the Gross Payment Status test. Any VAT failings that occurred before 6th April 2024 will not be considered, but subcontractors should be aware that any future VAT failures (to either submit a return or pay VAT due) may result in them having a Gross Payment Status application refused or their existing Gross Payment Status withdrawn.

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