New VAT compliance test for CIS

Jul 4, 2024

HMRC has issued guidance on various changes to the existing construction industry scheme (CIS) rules.

If you are a sub-contractor, obtaining gross payment status (GPS) allows you to receive full payments from your customers without tax deducted. To achieve GPS you need to prove that you or your business:

  • have filed and paid taxes on time in the previous twelve months (the compliance test);
  • fall under the CIS regime and have a bank account (the business test); and
  • have net construction turnover for the past twelve months of at least £30k.

From 6 April 2024 new and existing GPS applicants will also need to meet a VAT compliance test. To pass this test contractors will need to prove that they have filed all VAT returns and paid their VAT on time for the previous twelve months.

The new test offers some flexibility for late VAT returns and payments. Contractors can submit up to three late VAT returns as long as they are no more than 28 days late. Payment can be made up to fourteen days late but only where the VAT liability is less than £100.

If you are aware of potential issues with your VAT compliance in the last twelve months, contact us without delay and we can help you to remedy these before HMRC withdraws your GPS status.

HMRC verifies GPS holders’ compliance history on a twelve-month basis. The guidance indicates that the first review for new applicants will be brought forward to six months after the application, reverting to twelve months thereafter.

If you regularly engage the same suppliers or contractors you should re-verify their GPS on the HMRC website with these changes in mind.

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