CIS gross payment status is where no deductions are made by contractors. For businesses with turnover over £30,000 a CIS gross payment status is better for cash flow.
Who qualifies for CIS gross payment status?
Subcontractors can apply to be paid gross. This means that the contractor will pay the subcontractor the full amount owed without making any CIS tax deductions. The CIS tax rate is therefore effectively 0%.
The subcontractor with a CIS gross payment status would then be responsible for paying all of their taxes as they fall due. Typically these would be the taxes owed at the end of the financial year.
To qualify for gross payment status you must:
- Be able to show that you are up to date will all of your tax liabilities and filings
- Have a business bank account
You also need to pass a turnover test. HMRC will check that your labour only turnover (don’t include materials charged or vat) is in excess of:
- Soletraders – £30,000
- Partnerships – £30,000 per partner or £100,000 for the whole partnership
- Limited Companies – £30,000 per Director or £100,000 for the whole company
How to register for CIS gross payment status?
If you are not yet registered for CIS it is possible to register for gross payment status when you register as a subcontractor.
The partnership and Limited company forms include sections on registering for CIS gross payment status. See our blog register as a CIS subcontractor.
A soletrader registering as a subcontractor must also complete form CIS 302.
If you are already registered for CIS as a net subcontractor with 20% tax deductions but want to change to CIS gross payment status then you can either:
- Phone the construction industry scheme helpline on 0300 200 3210.
- Or apply through the government gateway ID. On the tax account, select other services and then select subcontractors.
Tip: HMRC see CIS gross payment status as a privilege which they can withdraw. If you fall behind with your tax liabilities or make late filings then HMRC may decide to remove your gross payment status. This doesn’t just apply to CIS taxes and filings but all taxes. Not paying your corporation tax on time is just one example which could lead to the loss of CIS gross payment status.
At Patterson Hall Chartered Accountants we are experts within all aspects of the Construction Industry Scheme. We have produced an ultimate guide to all things CIS with many user friendly helpsheets and examples. Take a look at our CIS Accountants guide.
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