CIS: Big administration changes.
With effect from 6 April 2016, a lot has changed within the CIS processing sector:
- The abolishment of the paper return,
- Amendment to the nil return obligation,
- Changes to the Compliance and Turnover tests when applying for Gross status.
Paper seems to be a thing of the past and so HMRC will no longer accept paper CIS returns from contractors. All returns will need to be e-filed, either via your HMRC online account or with the relevant software. With this new legislation being actioned, we may see that HMRC become stricter with late filing penalties, as their records will update with greater accuracy.
With the Turnover test being reduced from £200,000 to £100,000 for companies with multiple directors, we will see that previously ineligible companies will now be able to pass the turnover test. It is worth knowing that sole traders and single director companies are still required to earn above the £30,000 threshold in order to pass the Turnover test. HMRC have said that contractors are no longer required to submit a nil return if they have not made a payment to any subcontractors, although a late-filing penalty will automatically be issued by HMRC’s systems because they will still be expecting a return of some form, you can easily appeal to have the penalty removed.
Gross status is a perk worth having for most construction companies, and with the tests being simplified, HMRC predict it could affect approximately 90,000 subcontractors which currently operate under Net status – 20%. For the Compliance test, the director’s individual self-assessment obligations will not form a part of the initial or annual compliance tests, instead the company itself will be reviewed to determine whether you are eligible for Gross status.