Clause 34 of Finance Bill 2024 will add compliance with VAT obligations to the conditions for gaining and retaining gross payment status (GPS) under the construction industry scheme (CIS) from 6 April 2024. Alongside this change, HMRC have been consulting on draft regulations which would add VAT to the existing minor compliance failures that HMRC will overlook before GPS is refused or cancelled.
In its consultation response document, the CIOT welcomes the principle of excluding minor VAT errors but cautions that they could have limited application, recommending a post-implementation review to assess whether the exceptions from compliance have been effective in helping subcontractors retain or obtain GPS.
HMRC’s consultation also proposed exempting certain payments from landlords to tenants from the scope of the CIS, where the tenant engages a subcontractor to complete construction work on the property occupied by the tenant. The CIOT proposes amendments to the definition of lease agreement, to make sure that the term includes not only the lease itself under which rent is paid, but also any other document connected with the lease (intended principally to cover agreements for lease). Further changes are suggested to relax the requirement for construction obligations to relate exclusively to parts of the property that the tenant occupies under the lease, and to clarify how the commencement of the new rules operates in practice.
Clause 34 of Finance Bill 2024 will add compliance with VAT obligations to the conditions for gaining and retaining gross payment status (GPS) under the construction industry scheme (CIS) from 6 April 2024. Alongside this change, HMRC have been consulting on draft regulations which would add VAT to the existing minor compliance failures that HMRC will overlook before GPS is refused or cancelled.
In its consultation response document, the CIOT welcomes the principle of excluding minor VAT errors but cautions that they could have limited application, recommending a post-implementation review to assess whether the exceptions from compliance have been effective in helping subcontractors retain or obtain GPS.
HMRC’s consultation also proposed exempting certain payments from landlords to tenants from the scope of the CIS, where the tenant engages a subcontractor to complete construction work on the property occupied by the tenant. The CIOT proposes amendments to the definition of lease agreement, to make sure that the term includes not only the lease itself under which rent is paid, but also any other document connected with the lease (intended principally to cover agreements for lease). Further changes are suggested to relax the requirement for construction obligations to relate exclusively to parts of the property that the tenant occupies under the lease, and to clarify how the commencement of the new rules operates in practice.
