incorporation of a gross CIS subcontractor - does the company inherit the gross status?

Just a quickie.  Once upon a time with the old cis scheme if a sole trader was incorporated the previous cis history was taken into account when going limited - meaning that the new company could immediately gain gross payment status.

Does this rule still apply with the new CIS rules (when i say new i mean the ones that have only been in force for the last 3 years or so) or does the Limited Company start from scratch (which seems an illogical and damaging way of doing things).

 

Thanks

Nick

Comments
jimeth's picture

Not automatic but previous compliance is taken into account

jimeth | | Permalink

See http://www.hmrc.gov.uk/cis/advice-sub-pay.htm for information on what is taken into account when granting gross payment status.

For a new company the tax compliance records of the directors and controlling shareholders are taken into account.  So it looks to me as though a gross paid sole trader who incorporates should have a good chance of getting gross payment status for the new company.  However, I stand to be corrected if I have got this wrong.

Turnover limit

alanhone | | Permalink

If I understand the rules correctly (who does?) the sole-trader min turnover (less VAT & Materials) of £30K jumps to £200K for a partnership or a ltd co, for CIS Gross status to be granted.  Does the sole trader need to have had this (much) higher level of turnover for the preceeding 3 years to be considered for immediate gross status (all other conditions being satisfied) upon incorporation?

CIS gross registration

polln | | Permalink

the old rules required that the new entity has exactly the same owner(s) in exactly the same proportions for the history to be taken into account when considering an application for gross payment status. This is really only about turnover - the other criteria must also be met and will depend on the sole trader's track record in terms of compliance.

Assuming the new entity is a sole director/shareholder and that it is the individual who was the sole trader then, subject to meeting the business and compliance tests, it would fulfill the above criteria.

The turnover threshold for this entity would be £30,000 (net of VAT & Materials) as with the sole trader.

Yes it can be

Siân Woods | | Permalink

The previous history can be taken into account.  The company will need to register for CIS is the normal way.  As the company will have no history HMRC should look at the complaince history of the directors/shareholders.  There is an "additional information" box at the end of the form which can be completed to include details of the unincorporated business.

The turnover test is £200,000 or £30,000 per relevant person.  Relevant person being directors or directors and shareholders if a close company.

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