Important Changes to the Construction Industry Scheme (CIS) in 2024: What You Need to Know
Published 26th September 2024
As your trusted accountants at Hammond-Barr Accountants in Stevenage, we want to inform you about significant changes to the Construction Industry Scheme (CIS) that came into effect in 2024. These updates aim to reduce tax avoidance and create a fairer playing field in the construction industry. Let's break down what these changes mean for contractors and subcontractors.
Changes to Gross Payment Status (GPS)
The Gross Payment Status, which allows subcontractors to receive payments without tax deductions, has been enhanced with new rules that bring significant benefits:
VAT Compliance
From 6 April 2024, VAT compliance will be included in the GPS test. This means:
Timely VAT returns and payments are now essential for obtaining and maintaining GPS.
HMRC will consider your VAT compliance history alongside existing checks for taxes like PAYE and income tax.
Minor Errors
There's no need to panic about small mistakes. HMRC has made it clear that minor VAT errors won't lead to losing your GPS. This lenient approach ensures that insignificant oversights won't result in disproportionate consequences.
Stricter Measures for Serious Non-Compliance
HMRC will have the power to quickly withdraw GPS in cases of serious tax non-compliance, including VAT, PAYE, or self-assessment for income tax and corporation tax. This measure aims to prevent fraud and ensure compliance across the board.
Other Key CIS Changes
Landlord and Tenant Payments
From 6 April 2024, most payments where landlords pay tenants for construction work will be outside the scope of CIS. This simplification is particularly beneficial when tenants carry out work and hire subcontractors.
Digital Registration
CIS registration is moving online, making the process quicker and more straightforward. While the postal option will remain available now, digital registration will become mandatory.
Earlier Compliance Checks for New GPS Holders
New GPS holders will face their first compliance check after six months instead of 12, a change that they should be prepared for. Subsequent checks will revert to an annual basis.
What These Changes Mean for You
For Subcontractors:
Review your VAT compliance to ensure you meet the new GPS criteria.
Be aware that even minor VAT non-compliance could potentially jeopardise your GPS.
Consider the cash flow implications if you lose your GPS status.
For Contractors:
Continue verifying the registration status of your subcontractors before making payments.
Be alert to HMRC notifications about changes in subcontractors' status.
Understand that you may need to start making deductions for subcontractors who lose their GPS.
How We Can Help
At Hammond-Barr Accountants, we understand that these changes may seem daunting. We're here to provide the support you need to navigate this transition:
We can review your current VAT compliance and help you implement robust processes to maintain GPS.
Our team can assist with digital CIS registration and prepare you for future mandatory online processes.
We offer personalised advice on how these changes might impact your business.
Refrain from letting these CIS changes catch you off guard. Please book a consultation with us today to ensure your construction business is fully prepared for the April 2024 updates.
Stay compliant, protect your cash flow, and let us help you navigate these critical changes to the Construction Industry Scheme.
Want to know more?
You can contact Hammond-Barr accountants on 01438 281281 or via email at [email protected].
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