Here on the Knight and Company blogroll, we provide information and advice on an array of different topics for both businesses and individuals.
One of the most popular entries of 2016 was dedicated to gross payment status and how subcontractors can both obtain and benefit from it.
In light of the positive reaction we’ve received from our readers, we’ve decided to write a follow-up blog and provide a bit more detail on how gross payment status can benefit subcontractors.
To refresh your memory about how gross payment status works, you can read our previous post here.
The benefits of gross payment status
Cashflow
Gross payment status is particularly beneficial to subcontractors that periodically experience cashflow problems.
Rather than see a substantial portion of your earnings go immediately towards tax and national insurance contributions (NICs), taking a gross income will provide you with extra liquidity that will prove useful when your cashflow is tight.
Perception
Given that obtaining gross payment status can prove difficult for some contractors (and even harder to maintain for extended periods), successful qualification will do wonders in terms of how other contractors, businesses and lenders perceive your business.
Obtaining gross payment status demonstrates HMRC’s belief in you to be financially responsible enough to pay your own tax and NICs on time.
Reinforcing your reputation as a responsible subcontractor is a must if you want to win larger and more lucrative contracts in the future, as well as earn favourable credit terms on loans and overdrafts.
Prevent double taxation
Subcontractors who have their tax deducted at source are at risk of HMRC subjecting them to double taxation should they fail to file the self-assessment return by the 31 January deadline.
In this event, HMRC will produce an estimated tax bill without the knowledge that tax has already been paid at source, resulting in double taxation.
Having gross payment status eliminates this risk. You pay all your tax and NICs when you file your return. All you have to do is pay before the self-assessment deadline.
Contact us
If you’d like to find out more about obtaining gross payment status, or if your status has recently been revoked, we’re here to help.
Contact us on 01628 631 056 or email tracya@knightandcompany.co.uk for more information.