HMRC accused of ignoring the threat of gross payment status

Contractors and accountants have hit back at claims by HM Revenue & Customs (HMRC) that losing gross payment status is not a threat to firms' futures.

CJ revealed last week that more than 12,000 contractors have had their gross payment status revoked under the CIS tax scheme.

An HMRC spokesman said: "Currently we have no evidence that loss of gross payment status is causing businesses to close."

But furious contractors and their professional advisers have blasted HMRC for its blasé attitude.

Firms hit with loss of gross status see their cashflow suffer and risk losing jobs from public authorities which refuse to work with firms that have fallen foul of HMRC.

One contractor said: "We received a loss-of-gross-payment letter but managed to avoid it because we argued that we had only missed one deadline due to a public holiday.

"As a main contractor, with more than 60 employees working for Housing Associations, we risked being effectively put out of business with the loss of those jobs because someone left a cheque on their desk rather than in the post tray when they went off for their Christmas holiday and our two-week shutdown."

Another added: "As an employer of subcontractors, we know first-hand how the change of status causes problems at all levels.

"Subcontractors that are suddenly paid net often struggle with cashflow and can be unable to finance the size of contracts we offer.

"Financially it puts a strain on their cashflow. We have been placed in situations where subcontractors have requested we purchase the materials and be charged for the labour element only."