CIS can be confusing for both contractors and subcontractors alike. Accounting for your CIS deductions can create issues when billing for your work. CIS gross status can help to alleviate the stress, but is it right for you?

What is CIS?

CIS stands for the Construction Industry Scheme. It is a tax compliance framework that applies to both contractors and subcontractors within the construction industry. When paying a subcontractor, contractors must deduct CIS from their pay, submitting this amount to HMRC. These CIS deductions are then applied as advance payments towards the contractor’s PAYE and NI tax balance.

CIS covers several areas of work, including the construction of both permanent and temporary buildings, civil engineering, and demolitions. On the other hand, surveying and the manufacture of building materials are exempt from CIS. GOV.UK have a CIS Guide which breaks down which services fall under the Construction Industry Scheme.

Contractors must register for CIS. Subcontractors do not have a legal obligation to register, but they will have a higher deduction rate if they do not.

The Construction Industry Scheme was introduced as an effort to reduce rates of tax evasion within the construction industry by enforcing mandatory reporting of payments to subcontractors. It is helpful, particularly for smaller contractors, as it enables them to split their tax liability throughout the year.

What are the CIS rates?

The rate at which CIS is deducted depends on each subcontractor’s tax treatment. The rates are as follows:

Tax Treatment	Rate	When does this apply?
Standard Rate	20%	When a subcontractor has registered for CIS
Higher Rate	30%	When a subcontractor has not registered for CIS
Gross Rate	0%	When a subcontractor has registered for CIS and has been granted gross status

 

When you begin working with a subcontractor, you must verify them through the GOV.UK portal. To verify them you will need their name and UTR number. Verification gives you the subcontractor’s tax treatment.

Once verified, you will also receive a verification number. Most accounting software will require this when setting up a subcontractor as a supplier.

What does CIS Gross Status Mean?

CIS Gross Status sets the CIS rate at 0%. This means no CIS is deducted; contractors must pay a gross rate subcontractor in full.

Under this status, subcontractors can pay their PAYE & NI at the end of the tax year, rather than spread throughout. If you are reliant on cash flow, this can be very beneficial as you will no longer need to wait until the end of the year for the CIS to be refunded.

As the requirements to become eligible for gross payment status are quite strict, it can also show clients and contractors that you are reliable and financially responsible. This could help to sway a contract negotiation in your favour.

Am I Eligible for Gross Status?

To be eligible for CIS Gross Status, you must:

• Do or provide labour for construction work in the UK
• Have a business bank account
• Have no outstanding balances with HMRC – PAYE, VAT and Corporation Tax/Self-Assessments must have been paid on time
• Meet a minimum turnover within the last 12 months

The minimum turnover needed to be eligible is reliant on the type of business:

Type of Business	Minimum 12-Month Turnover (excluding VAT)
Sole Trader	£30,000
Partnership	£30,000 per partner – £100,000 within the whole partnership
Limited Company	£30,000 per director – £100,000 within the whole company

Please note, if your company has five or less directors, each must have an annual turnover of at least £30,000.

The turnover must be related to construction activities. Any non-construction turnover should be excluded.

Once gross status is granted, HMRC will continuously review your CIS. If you fail to comply with CIS rules (such as paying your tax on time) they can revoke your gross status.

How Can I Apply for CIS Gross Status?

You can apply for gross status online or by post.

Online submissions are done through the GOV.UK portal. You will be required to provide the UTR number, turnover, proof of turnover, and bank details. Additional information, such as your NI Number, and PAYE and VAT registration numbers, will also be requested.

If you cannot complete a submission online, you can apply by post. In addition to the information needed for an online submission, you must complete a form depending on your business type.

An agent (i.e., an accountant) can also submit a Gross Payment Status application on your behalf.

I am Unsure About Applying for CIS Gross Status – Can You Help?

At WKM Accountancy Services, we can assess your eligibility for CIS Gross Status and make the application on your behalf. We also offer other CIS-related services.

If you would be interested in this service, or require help with the other financial aspects of your business, please contact us.