A new measure is being introduced to the Construction Industry Scheme (CIS) to help tackle non-compliance within the construction sector.

The compliance test for subcontractors who apply for, or hold, gross payment status is being strengthened – now only individuals, firms and companies who are compliant with their VAT obligations will be granted and able to retain gross payment status.

Gross payment status

The CIS dictates that contractors must make deductions on payments made to subcontractors and pay the withholding tax to HMRC. However, subcontractors that apply for and obtain gross payment status can receive payments from contractors gross, with no withholding tax deducted.

If subcontractors wish to gain, and keep, gross payment status then they must pass 3 compliance tests – compliance; turnover; and business.

New measures tackle compliance

Subcontractors must now ensure that they are fully compliant and with their VAT obligations; Corporation Tax Self-Assessment, Income Tax Self-Assessment and PAYE to gain gross payment status.

Minor VAT compliance failures will not be considered when determining gross payment status.

The objective of the measure is to penalise those subcontractors that seriously breach their compliance obligations, creating a fairer construction sector.

Other CIS reforms

Following the recent CIS Reform Consultation, there will also be other measures that come into effect from 6 April 2024 – these include

  • Removal of the majority of landlord to tenant payments from the scope of the CIS;
  • Digitalising applications for CIS registration; and
  • Bringing forward the first review of a gross payment status holder’s compliance history from 12 months after application to 6 months, reverting to 12 months thereafter.

How M+A Partners can help

For any queries on the changes to the Construction Industry Scheme and complying with VAT obligations, please get in touch with our experts or your usual M+A Partners contact.

Our Expert