You can apply for gross payment status at the same time that you register for the CIS scheme.
Following that, HM Revenue and Customs (HMRC) will make a review of your business every year.
The main purpose of the yearly review is for HMRC to decide whether your business can keep its gross payment status.
There are several condition that you must meet. For example, you would need to be on time with all your tax returns and your National Insurance payments to retain gross payment status.
Note: Some contractors and subcontractors will run a limited company (e.g. not a sole trader). In this case, the HMRC CIS annual review focuses on the actual company rather than any individual directors or shareholders.
Gross Payment Status Conditions
Failing to meet the annual review conditions means you could fail the test. As a rule, HM Revenue and Customs would then remove gross payment status from your business. But, HMRC do allow a modest amount of leniency for late payments or returns (see below).
You must contact HM Revenue and Customs (HMRC) if you cannot pay your tax bill on time. They may grant you more time to pay. If so, it would not affect the gross payment status.
If You Fail the CIS Annual Review
HM Revenue and Customs will provide you with a letter if your business is going to fail the CIS review. The letter also explains the reasons why it failed. You can write back to HMRC if you disagree with the findings.
HMRC would halt the removal of gross payment status if they accept your explanation. But, if you do not respond to their letter, or they do not accept the explanation, HMRC would then:
- Send you a letter that lists which conditions you did not meet.
- Inform you that they are withdrawing gross payment status (usually within three months).
Note: You would get thirty (30) days from the date of the letter to make an appeal if you feel that HMRC made the wrong decision.
How to Reapply for Gross Payment Status
As a rule, you can apply again even if HM Revenue and Customs cancel gross payment status for your business. But, you would need to wait one (1) year from the cancellation date before reapplying.
Reporting a Change of Status
Under the Construction Industry Scheme (CIS) there are several changes you need to report. You can report a change of business status by calling the Construction Industry Scheme (CIS) helpline number.
You must inform them any time you:
- Change the legal status of your business (from a sole trader to a partnership).
- Leave a business partnership or a limited company to become a sole trader.
- Set up a company or change your business to operate as a company.
In most cases, you would need to register once more. The rules of CIS scheme do not allow for the transfer of a registration from an old business structure.
If you already had gross payment status you would need to apply once again to get GPS. You must also report a change in circumstances to HM Revenue and Customs, such as if you:
- Change the trading name of your business.
- Change the address of your business, the registered office, or your personal address.
- Stop trading altogether.
- Add new shareholders.
Note: Failing to tell HMRC about adding new shareholders within thirty (30) days means they can withdraw your gross payment status.
If You Stop Trading
Under CIS, a business in administration can continue receiving payments for work carried out. So, the payments should continue in the same way (either gross or under deduction).
ALSO IN THIS SECTION
CIS Subcontractor Obligations | A section explaining key regulations CIS subcontractors must follow.
Pay Tax and Claim Deductions | Responsibilities for paying tax and National Insurance for the business.