Construction Industry Scheme Changes from 6 April 2024

Following on from our blog of 23 May 2023 regarding a consultation into the possible reform of the Construction Industry Scheme (CIS) HMRC have announced that from 6 April 2024 there will indeed be changes made:-

Gross Payment Status (GPS) compliance test

As expected compliance with VAT filing and payment obligations will be added to the current compliance test for gaining and retaining GPS. For existing GPS holders the compliance test will only consider VAT compliance from 6 April 2024.

To ensure minor VAT compliance failures will not result in GPS refusal or removal, there will be exceptions to compliance obligations.

In line with other taxes, the following failures will be overlooked:

• 3 late submissions of VAT returns — up to 28 days late

• any late payment of VAT where the amount is under £100

• 3 late payments of VAT liability of £100 or more — up to 14 days late

Existing appeal rights will apply and GPS will not be removed where there is a reasonable excuse for any compliance failures.

HMRC is also bringing forward the first review of compliance with CIS for businesses  from 12 months after application to 6 months. After this point it will revert to 12 months.

Fraudulent returns and information

The grounds that HMRC can immediately cancel GPS in cases of fraud will be extended to include VAT, Corporation Tax Self Assessment (CTSA), Income Tax Self Assessment (ITSA) and PAYE (Pay As You Earn).

If HMRC has grounds to suspect that the GPS holder has fraudulently provided an incorrect return or incorrect information in relation to any of these taxes, GPS can be immediately removed.

Existing appeal rights will apply.

Landlord to tenant payments

To reduce administrative and financial burdens on both landlords and tenants, most landlord to tenant payments for construction work will no longer be within the scope of the CIS.

Payments made under a construction contract by a landlord to a tenant from 6 April 2024 will be outside the scope of the CIS, where:

• the payment is made by or on behalf of the landlord

• the person receiving the payment is a tenant or prospective tenant of the landlord

• the payment is for construction operations agreed in connection with a lease or an enforceable agreement to enter a lease

• the tenant that occupies or will occupy the property will carry out the construction operations itself, or a third person is contracted to carry out the construction operations

• the payment is for construction work intended primarily for the benefit and use of the tenant that occupies or will occupy the property under the lease

The new rules supplement the existing rules which specify that payments made by a landlord to a tenant for construction operations in connection with a lease or an enforceable agreement to enter into a lease are not contract payments. These types of payment are therefore outside the scope of the CIS.

Subcontractor registrations and applications for GPS

A new digital form for subcontractor registration and GPS applications will be introduced. Supporting evidence can be uploaded and there will be the ability to save and return to applications.

From this time, subcontractors will no longer be able to register for the CIS or apply for GPS over the telephone, unless digitally excluded.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Anthony Fomin on Unsplash