There are three requirements for subcontractors to be paid gross. They include a business test, a turnover test and a compliance test. To qualify for gross payment a subcontractor must:
- have paid their tax and National Insurance on time in the past
- do construction work (or provides labour for it) in the UK
- run the business through a bank account.
The turnover for the last 12 month (ignoring VAT and the cost of materials) must be at least:
- £30,000 for a sole trader
- £30,000 for each partner in a partnership, or at least £100,000 for the whole partnership
- £30,000 for each director of a company, or at least £100,000 for the whole company
If your company is controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.
Subcontractors not registered with the HMRC will suffer the higher rate deduction (30%) from any payments made to them by contractors.