• Date

    14 Mar 2024
  • Category

    Employer Solutions

An overview of the Construction Industry Scheme changes set to come into effect

In the Autumn Statement in November 2023, the Chancellor, Jeremy Hunt, announced changes to the Construction Industry Scheme (CIS) Regulations. These proposed changes followed a consultation conducted by HMRC earlier in the year. The draft regulations have now been provided and are expected to come into force on 6 April 2024. So, what do these changes mean for those who work within the Construction Industry Scheme?


Gross Payment Status 

The proposed changes include amendments to the compliance tests required to both obtain and retain Gross Payment Status (GPS). For the first time, compliance with VAT obligations will form part of the compliance tests both on initial application for GPS and the annual review undertaken by HMRC to determine if a subcontractor can retain GPS. Only VAT compliance from April 2024 will be considered.

As with the other compliance tests, minor failures and errors will not result in GPS being refused or withdrawn.

The proposed regulations also allow for HMRC to immediately remove GPS where a contractor or subcontractor provides fraudulent returns or information in connection with obligations:

  • arising under any provision of PAYE regulations
  • to submit a self-assessment return
  • arising under any provision of the VAT Act 1994 or of regulations made under it.

HMRC may also immediately cancel GPS when a subcontractor or contractor has knowingly failed to comply with an obligation arising or in connection with any provision of the CIS legislation.

Historically, GPS has been subject to an annual review by HMRC. From April 2024, the first review after a subcontractor is granted GPS will be brought forward to 6 months before reverting to annual reviews thereafter. This will mean that non-compliance with VAT obligations after April 2024 could have an impact sooner rather than later.


Landlord to tenant payments

Whether or not payments made to tenants by landlords fall within the scope of the Construction Industry Scheme has long been an area thwart with complexity. Following the consultation, HMRC have now sought to simplify the position. From April 2024, payments made from a landlord to a tenant for construction operations agreed as a consequence of a lease agreement will not fall within the scope of the Construction Industry Scheme Regulations.

The tenant should ensure that there is a written contract between themselves and the business undertaking the construction work and that the payment from the landlord is only used for construction operations to the parts of the property that the tenant occupies, or will occupy under the lease agreement.

The widening of this exemption to landlord payments should result in most payments from landlords to tenants being outside the scope of the scheme, therefore negating the requirement for tenants to register as subcontractors and suffer deductions on these payments.


Increased digitalisation and verification

In addition to the changes to the regulations, HMRC are seeking to increase the use of digitalisation within the scheme. From April 2024, digital applications for CIS registrations will be introduced, at which time telephone applications will no longer be available for most.

It will also be possible for a contractor to verify the status of a subcontractor ahead of engaging them – previously, verification could only be undertaken when the first payment was due. This will be welcomed by many contractors.  This speculative verification can be undertaken in the usual manner, either through a Government Gateway account or commercial software.


We are here to help

The CIS Regulations remain a complex area and the construction sector is one which continues to be the focus of HMRC enquiries. Azets can help businesses navigate CIS by undertaking reviews, managing HMRC enquiries, assisting with registrations, providing in-house bespoke training sessions and general advice and guidance on any area of the scheme.  If you require any support, please get in touch with a member of our specialist Employment Tax team or your usual Azets advisor.

About the author

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Joanna Gander

Senior Manager Southampton
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