Surge in builders registering for gross payment status as delays over tax rebates mount

A total of 105,000 subcontractors have registered for gross payment in 2014/2015, the highest level in four years.

According to data obtained by Nixon Williams under the Freedom of Information Act, a record breaking number of builders have registered to be paid gross as delays receiving end of year tax refunds worsen.

At the same time, the number of construction businesses has declined by 0.6%, from 253,121 to 247,105, although the number has increased slightly in the past year.

The delays at HMRC paying annual tax refunds is the reason for the increased level of builders choosing to register for gross payment status under the Construction Industry Scheme (CIS). CIS subcontractors often over pay tax, with refunds taking six months or more, for refunds worth thousands of pounds. As a result, some companies have experienced cashflow problems and bankruptcy.

Daniel Knowls, Practice Manager at Nixon Williams said: “Growing numbers of subcontractors are being advised to register for gross payment status, allowing them to better manage their cashflow and avoid lengthening delays obtaining tax refunds. It is very common for subcontractors to have paid too much tax, and the last thing they need is to have to wait months and spend time chasing HMRC to get the money back.

“Gross payment status was sometimes regarded as a mixed blessing. It allowed subcontractors to manage their own tax affairs but at the cost of a higher administrative burden and an annual review by HMRC. With delays over tax repayments mounting, growing numbers of subcontractors are realising that the extra hassle is now well worth the effort.”

HMRC has promised a 25-day turn around target for tax repayments, however this isn’t adhered to due to cuts in staff and additional security checks imposed.

 

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