Construction Industry – Are you sitting on a time bomb?

Anyone involved in the construction industry whether as a contractor or sub-contractor will be aware of the need to retain gross payment status i.e. the ability to be paid by your customers without having tax deducted from the payment. However, rather fewer will be aware of just how easy it is to lose that status. Here is a list of the misdemeanours which will trigger an AUTOMATIC withdrawal of gross payment status. It makes sobering reading:

1. Submission of 1 monthly return (even if a nil return) more than 28 days late;
2. One late payment of PAYE/NIC/CIS deductions more than 14 days late;
3. One late payment of a director or shareholder self assessment tax more than 28 days late;
4. Director or shareholder 's personal tax return submitted 1 day late;
5. Form P35 submitted 1 day late;
6. One late payment of corporation tax more than 28 days late;
7. HMRC think you might not comply in the future (yes- really!)

The ticking time bomb comes in the form of a historical Compliance Review which can be undertaken by HMRC at any time. By this stage, of course, it is too late to do anything (but see below).

By any standards, this legislation is draconian. It requires a very high degree of compliance on an industry which is not renowned for its attention to paperwork and administration.

Consequences of loss of gross payment status include exacerbated cashflow problems, loss of contracts, redundancies, personal financial difficulties , and all the collateral damage which flows from those problems.

The moral of all this is:
• Check regularly that you are compliant and that all your staff are fully aware of the rules;
• If you have your status withdrawn by HMRC enlist specialist help.

There is an appeal procedure to the First Tier Tax tribunal but this is not somewhere to bring out the "trusty sword of truth". The tribunal will ignore the potential effect on the business and will also pay no attention to arguments that things are now in order and will not happen again. Finally, the previous defence that breaches were minor and technical are no longer available.

But there are ways of presenting a successful appeal but these all involve picking ones way through the legislation and regulations and taking advantage of the defences which are available.

As they say on the telly, if you have been affected by any of the issues in this article, contact

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