Gross payment status is a desirable goal for subcontractors operating under the Construction Industry Scheme (CIS) as it allows them to receive income without tax deductions. It can also improve your cash flow and business standing as a reputable contractor.
To qualify for gross payment status, contractors must apply to HMRC and show they meet the specific criteria:
- Regular Tax Compliance – The subcontractor must demonstrate a consistent record of tax compliance, including the timely submission of all tax returns and payments. Any history of late or incorrect filings may impact eligibility.
- Turnover Thresholds – Subcontractors must meet the turnover thresholds specified by HMRC. These are net construction turnover of at least £30,000 for an individual, £30,000 net construction turnover per partner if trading as a partnership or £30,000 per director if trading as a limited company. A net construction turnover of £100,000 for a partnership or limited company also passes this threshold. It is important to accurately calculate and report turnover to ensure eligibility for gross payment status. ‘Net construction’ turnover means sales of construction services excluding VAT and materials.
- The subcontractor must have a business bank account and carry out business in the UK.
Meeting the eligibility criteria for the 12 month period prior to application is crucial for subcontractors seeking gross payment status, and carefully consideration should be taken when reviewing their tax compliance history and turnover figures before applying.
If your business is currently suffering CIS tax deductions, and you think you may qualify for gross payment status, then please email our EQ Property & Construction team at property@eqaccountants.co.uk or contact one of our offices.