As if the construction industry didn't already have enough to cope with, now firms face the loss of their gross payment status as HM Revenue and Customs (HMRC) clamps down.
The fact that more than 12,000 contractors have had their gross payment status revoked - out of the 30,000 that have been reviewed - will cripple these firms.
All of these reviews and the subsequent loss of gross payment status stem back to the new CIS scheme which, after a year of delay, came into action in April 2007. At that time, there were worries that firms would ignore the complex rules and regulations that came with the new scheme. And that is what has happened. Late returns trigger an HMRC review and that's what has caught out the affected contractors.
There is no flexibility with new CIS - the rules are stringent, and even doing something as innocent as putting the wrong stamp on the envelope can make the return late and so alert HMRC's investigators.
The one in three who have lost their gross payment status is a shockingly high hit rate, which will also surely encourage HMRC to dig further. And with HMRC keen to get its hands on the additional £130m it claimed it would raise from the construction industry, it would appear that this is the start of a real threat for contractors. It may be a frustrating system to deal with, with no leeway, but this news means only one thing - CIS returns have to take priority if HMRC is not going to drive your business to the wall.
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