What Does Gross Payment Status Mean?
Most CIS contractors and subcontractors see gross payment status as being beneficial to their business.
It means you can take better control of your own cash flow during each tax period.
You may find that it also improves your reputation for working with large scale contractor operations.
The best time to apply for gross payment status is at the same time you register for CIS. Contractors would then be paying you in full and without deductions.
Tax and National Insurance would become an annual payment made at the end of the tax year once you get gross payment status.
The process differs if you already registered for the Construction Industry Scheme (CIS). You can still apply online or you may need to contact the CIS helpline to apply for gross payment status.
Applying for Gross Payment Status Online
- Log into the system using your Government Gateway ID (up to 12 characters).
- Go to ‘Your tax account’ and select ‘Other services’.
- Follow that by selecting ‘Construction Industry Scheme – Subcontractors’.
Qualifying for Gross Payment Status
There are several tests for a business to pass before HM Revenue and Customs (HMRC) will grant gross payment status. HMRC will need to see that:
- You made payments for tax and National Insurance on time for previous tax periods.
- You are running your business through a bank account.
- Your business carries out building or construction work in the United Kingdom (or provides labour for CIS).
HM Revenue and Customs will also view the business turnover for the previous 12 months. They will ignore the VAT portions and cost of building materials. But, after those deductions, business turnover must be at least:
- £30,000 (for a sole trader).
- £30,000 (for each partner in a business partnership). It can also be a minimum of £100,000 for the whole partnership.
- £30,000 (for each director of a company). It can also be a minimum of £100,000 the whole company.
Note: A company controlled by five (5) people or fewer must have an annual turnover of £30,000 for each of them.
Paying Tax with Gross Payment Status
You will need to declare payments as income at the end of the tax year. Thus, depending on the legal status of your business, you will either pay through:
- Self Assessment tax return (for a sole trader or a business partnership).
- Corporation Tax return (for a limited company).
ALSO IN THIS SECTION
Pay Tax and Claim Deductions | Responsibilities for paying tax and National Insurance for the business.
CIS Annual Review | HMRC review businesses each year to decide whether they can keep their status.