CIS GROSS PAYMENT STATUS:

General Overview

 

Gross Payment Status (GPS) allows sub-contractors to be paid without deduction and is considered to be the preferred payment option of both contractors and sub-contractors within the Construction Industry Scheme. CIS registered sub-contractors can benefit from payment of a gross income that isn’t taxed in advance, providing cash flow benefits.

 

Click on the tabs below to find out more about Gross Payments Status:

BENEFITS OF GPS

COMPLIANCE TESTS

APPLICATION

KEEPING TRACK

CASH FLOW:

Registration with the CIS already ensures a reduction in your CIS tax deduction rate from 30% to 20%. This additional 10% is intended to contribute to your or your business’ cash flow, enabling you to cover wages, materials and other costs.

 

Sub-contractors need to consider the impact that CIS deductions can have on cash flow, as having a 20% or 30% deduction applied on   payments, may affect the sub-contractor’s ability to pay invoices, debts, and costs of materials.

 

However, gross payment status goes one step further to improve your cash flow, as you receive full payment from contractors of every invoice with no deduction.

 

REPUTATION:

Gross payment status is viewed favourably by construction firms and contractors, enhancing approval with reputable contractors. It indicates reliability and security to contractors, as HMRC entrusts sub-contractors to pay their own monthly tax payments on time.

 

TIME SAVING:

Gross payment status reduces administrative time in preparing payments for HMRC for contractors, and eliminates the risk of contractor fines for incorrect returns or late payments.

NEED ANY HELP OR SOME MORE INFORMATION ON GROSS PAYMENT STATUS?  IF SO CALL THE NUMBER TO THE RIGHT AND A REPRESENTATIVE WOULD BE HAPPY TO DISCUSS IT WITH YOU.

0800 083 5699

QUALIFYING FOR GROSS PAYMENT STATUS

 

Qualifying for, and maintaining, gross payment status can be a difficult process, with sub-contractors benefiting significantly from the support and advice of CIS tax accountants or professional advisors to assist with applying for gross payment status.

 

Subcontractors will need to be registered with the Construction Industry Scheme to initiate the gross payment status  process, and must meet the following criteria:

1

The Business Test

The company must be able to show (through documents/contracts/invoices) that it is carrying out construction work in the UK or providing labour for such work and operated with a UK bank account.

2

The Compliance Test

To pass the business test  your business must complete construction work within the UK and hold a bank account.

3

The Turnover Test

HMRC will assess your turnover for the last 12 months. In order to pass the standard turnover test you must be able to demonstrate turnover of;

 

Sole traders: an annual turnover of at least £30,000, excluding VAT, earned through construction work.

 

Partnerships and limited companies: a turnover of £100,000, or if lower, £30,000 multiplied by the number of partners/directors in the business.

 

There are a number of other turnover tests that may be met in order to pass this part of the gross payment status application.

APPLYING FOR GROSS PAYMENT STATUS:

Should you meet all of the requirements, you can apply for gross payments via HMRC form CIS305, by providing your company details and turnover information. This can sometimes prove to be a daunting and overwhelming task, but fortunately there are specialist accountancy teams and professional advisors who are on hand to help

KEEPING TRACK:

HMRC routinely monitor gross payment status, and should a business fail to comply with its obligations under the CIS, they are able to revoke gross payment status and may impose a fine depending on the reason behind the lapse in compliance.

(CIS Solve Solutions experts/ a CIS specialist finance team) can help to complete the time-intensive, stress-laden, and often complex application process, and also manage future payments on your behalf, to ensure you maintain compliance with gross payment status in the long-term.

  • Our specialist team can help to:
  • Calculate and provide evidence of turnover in support of your application
  • Aid with the application process, ensuring all documentation is completed and submitted accurately to HMRC.
  • Ensure you keep on top of monthly tax payments, paying the right tax amount at the right time
  • Give advice on working in the most tax efficient way for your business
  • Give you more time to focus on your business by removing the hassle of completing financial and administrative tasks.

 

 

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BENEFITS OF GPS

 

CASH FLOW:

Registration with the CIS already ensures a reduction in your CIS tax deduction rate from 30% to 20%. This additional 10% is intended to contribute to your or your business’ cash flow, enabling you to cover wages, materials and other costs.

 

Sub-contractors need to consider the impact that CIS deductions can have on cash flow, as having a 20% or 30% deduction applied on   payments, may affect the sub-contractor’s ability to pay invoices, debts, and costs of materials.

 

However, gross payment status goes one step further to improve your cash flow, as you receive full payment from contractors of every invoice with no deduction.

 

REPUTATION:

Gross payment status is viewed favourably by construction firms and contractors, enhancing approval with reputable contractors. It indicates reliability and security to contractors, as HMRC entrusts sub-contractors to pay their own monthly tax payments on time.

 

TIME SAVING:

Gross payment status reduces administrative time in preparing payments for HMRC for contractors, and eliminates the risk of contractor fines for incorrect returns or late payments.

 

 

COMPLIANCE TESTS

 

QUALIFYING FOR GROSS PAYMENT STATUS

 

Qualifying for, and maintaining, gross payment status can be a difficult process, with sub-contractors benefitting significantly from the support and advice of CIS tax accountants or professional advisors to assist with applying for gross payment status.

 

Subcontractors will need to be registered with the Construction Industry Scheme to initiate the gross payment status  process, and must meet the following criteria:

 

1. The Business Test

The company must be able to show (through documents/contracts/invoices) that it is carrying out construction work in the UK or providing labour for such work and operated with a UK bank account.

 

2. The Compliance Test

To pass the business test  your business must complete construction work within the UK and hold a bank account.

 

3. The Turnover Test

HMRC will assess your turnover for the last 12 months. In order to pass the standard turnover test you must be able to demonstrate turnover of;

 

Sole traders: an annual turnover of at least £30,000, excluding VAT, earned through construction work.

 

Partnerships and limited companies: a turnover of £100,000, or if lower, £30,000 multiplied by the number of partners/directors in the business.

 

There are a number of other turnover tests that may be met in order to pass this part of the gross payment status application.

 

 

APPLICATION

APPLYING FOR GROSS PAYMENT STATUS:

Should you meet all of the requirements, you can apply for gross payments via HMRC form CIS305, by providing your company details and turnover information. This can sometimes prove to be a daunting and overwhelming task, but fortunately there are specialist accountancy teams and professional advisors who are on hand to help

 

 

KEEPING TRACK

HMRC routinely monitor gross payment status, and should a business fail to comply with its obligations under the CIS, they are able to revoke gross payment status and may impose a fine depending on the reason behind the lapse in compliance.

(CIS Solve Solutions experts/ a CIS specialist finance team) can help to complete the time-intensive, stress-laden, and often complex application process, and also manage future payments on your behalf, to ensure you maintain compliance with gross payment status in the long-term.

  • Our specialist team can help to:
  • Calculate and provide evidence of turnover in support of your application
  • Aid with the application process, ensuring all documentation is completed and submitted accurately to HMRC.
  • Ensure you keep on top of monthly tax payments, paying the right tax amount at the right time
  • Give advice on working in the most tax efficient way for your business
  • Give you more time to focus on your business by removing the hassle of completing financial and administrative tasks.