CIS gross payment status: how to get it and keep it

What is CIS gross payment status?

It is an HMRC status that lets you be paid with no CIS deduction. GOV.UK: Having gross payment status means contractors will pay you in full, without deductions. You’ll pay all your tax and National Insurance at the end of the tax year.

It does not lower your tax. It changes when you pay it. Say you invoice £10,000 for labour:

• Without it: the contractor takes 20%, £2,000, and pays you £8,000. You claim the £2,000 back against your tax bill.
• With it: the contractor pays you £10,000, and you set money aside for the tax yourself.

You must declare your payments as income at the end of the tax year in your Self Assessment return as a sole trader or partner, or your Corporation Tax return as a company. Without it, this is how the deductions are claimed back.

Gross payment status stops the monthly deduction. The deduction itself is explained in how CIS works.

How do I qualify for gross payment status?

By passing three tests. You need to pass all of them:

• Business test: your business does construction work (or provides labour for it) in the UK, and is run through a bank account.
• Turnover test: your construction turnover over the last 12 months, ignoring VAT and the cost of materials, is at or above the threshold for your type of business.
• Compliance test: you have paid your tax and National Insurance on time in the past, and sent your returns on time.

Source: GOV.UK, gross payment status.

What turnover do I need for gross payment status?

£30,000 a year as a sole trader, and more for a partnership or company. HMRC will look at your turnover for the last 12 months. Ignoring VAT and the cost of materials, your turnover must be at least:

Gross construction turnover less the cost of the materials that earned it. VAT is not in the figure at all. HMRC’s manual: Related materials are the costs incurred on materials used in carrying out contracts.

For a company, GOV.UK says £30,000 for each director of a company, or at least £100,000 for the whole company, and adds: If your company’s controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them. HMRC’s manual counts directors and where the company is a ‘close’ company, its beneficial shareholders.

Count the most people you had at any point in the 12 months, not the number on the day you apply. Two examples:

• A partnership of 4: the standard test is 4 times £30,000, which is £120,000. The alternative test is £100,000, so £100,000 of turnover is enough.
• A company with 2 directors who own all the shares: 2 times £30,000 is £60,000. That is below the £100,000 alternative, so £60,000 is the figure to beat.

HMRC, CISR44100: £30,000 multiplied by the maximum number of the partnership’s participants at any one time in the 12 months preceding the application date.

What does the compliance test check?

That you sent your returns and paid your tax on time over the last 12 months: your Self Assessment or Corporation Tax returns and payments. If you also pay subcontractors or staff, it checks your PAYE and CIS payments and your monthly CIS returns as well.

VAT has counted since 6 April 2024. GOV.UK: From this date, subcontractors will have to demonstrate compliance with VAT obligations to be granted and keep gross payment status. For a company, HMRC checks the directors and shareholders too when you first apply, but only the company after that.

HMRC calls this check the Tax Treatment Qualification Test (TTQT). CISR43070: For a company, the compliance of the directors or shareholders is only checked at the initial application for gross payment status and not annually thereafter.

Can I keep gross payment status with a late return?

Yes, within limits. GOV.UK says You’ll be allowed a small amount of late payments or returns. HMRC’s manual sets out what it can overlook in the 12 months:

• Three late submissions of the contractor’s monthly return CIS300 - up to 28 days late
• Three late submissions of VAT returns - up to 28 days late
• Three late payments of CIS deductions/PAYE/VAT of £100 or more - up to 14 days late (failures allowed for each tax individually)
• Any late payment of CIS deductions/PAYE/VAT where the amount is under £100
• Any Income Tax or Corporation Tax Self Assessment return made not later than 28 days after the due date

And what it cannot:

• Any submission of the contractor’s monthly return, a VAT return or Income Tax Self-Assessment or Corporation Tax Self-Assessment return made later than 28 days after the due date
• Any payment of CIS deductions/PAYE/VAT of £100 or more made later than 14 days after the due date
• Any late payment of National Insurance contributions

Source: HMRC, CISR46080, compliance tolerance.

If you cannot pay on time, ask HMRC for more time before the due date, not after it.

How do I apply for gross payment status?

Online or by post, on the form for your type of business. You can apply for gross payment status by filling in an online or postal form. This will also register you for the Construction Industry Scheme (CIS) if you’ve not already registered.

1. Check you pass all three tests. Work out your net construction turnover for the last 12 months, and look for any late returns or payments in that time.
2. Gather what the form asks for.
   • your Unique Taxpayer Reference (UTR), and your National Insurance number as a sole trader
   • your turnover for the last 12 months
   • evidence of that turnover, such as bank statements, payment and deduction statements and invoices
   • your business bank account details
   • for a partnership or company, the name, address, UTR and National Insurance number of each partner, or of each director and person with significant control
3. Fill in the form for your business. Sole trader (postal form CIS302), Partnership (postal form CIS304), Limited company (postal form CIS305). Get all of your information together before you start. You will fill this form in online and you cannot save your progress.
4. Wait for HMRC’s decision. If you are refused, HMRC writes to say which test you failed, and you are registered to be paid under deduction instead.

A refusal is not a ban. HMRC’s manual: Where a subcontractor’s initial application for gross tax treatment has failed they are free to re-apply for gross tax treatment at any point in time, though any late returns or payments still inside the 12 months will fail you again. If you are new to CIS, registering as a subcontractor explains the first step.

How often is gross payment status reviewed?

Every year, and the first one comes sooner. If you have gross payment status, HM Revenue and Customs (HMRC) will review your business every year, to decide if you can keep your status. HMRC’s manual says the first check runs part way through your first year, then once a year after that. It does not fall on a set date, and each one looks back over the previous 12 months.

If you run a limited company, HMRC will review the company itself, rather than individual directors or shareholders.

HMRC, CISR43070: The first TTQT after being granted GPS will be run after 6 months, following that it will be run annually for all subcontractors holding gross payment.

What happens if I fail the review?

You get a warning letter first, then a notice, and your status changes some weeks after that. In order:

1. A warning letter. You’ll get a letter explaining you’re about to fail the review, along with the reasons why. Write back with your reasons. If HMRC accept your explanation, they will not remove your gross payment status.
2. A withdrawal notice (form CIS308). If HMRC does not accept your reasons, it writes to say which conditions you missed and the date your status ends.
3. Within 30 days: You appeal, in writing, stating your grounds. This is the deadline that matters most, and it is the first one to fall.
4. Day 55: If you have not appealed, the people who pay you are told. Every contractor who has paid or verified you in the last two years gets a CIS316.
5. Day 90: The status actually changes and deductions start coming off your payments. Until this day you are still paid gross.

Do not wait for the change before you appeal. GOV.UK: If you think HMRC have made the wrong decision, you have 30 days from the date of this letter to appeal. Missing the 30 days is bad but it is not always final. HMRC can accept a late appeal, and where it does, its own system puts the gross status back and tells your contractors, even if the change has already happened.

Sources: GOV.UK, annual review; HMRC, CISR49040 and CISR49050.

Can HMRC cancel gross payment status straight away?

Yes, since 6 April 2026, where it is linked to fraud. HMRC can cancel it immediately where the business knew or should have known that the payments or credits were connected to deliberate non-compliance by another party. There is no warning letter and no wait before it takes effect. HMRC must give the person notice stating the reasons for cancelling GPS.

You can still appeal, in writing. The notice of appeal must state the grounds for appeal and be given in writing to HMRC within 30 days of the cancellation.

How long before I can reapply for gross payment status?

A year if you lost it at the review, and five years if it was cancelled under the fraud measure.

• After a failed review: If HMRC cancel your gross payment status, you need to wait a year from the date of the cancellation before you can reapply.
• After a fraud cancellation: The person cannot reapply for GPS where it has been removed under FA04/S66(3A) for five years, beginning with the day on which the cancellation takes place.
• After a refused application: any time, as above.

Until then, contractors take 20% off your labour, or 30% if they cannot verify you.

Can a contractor lose their own gross payment status?

Yes. If you pay subcontractors as well as working for others, running CIS badly on the paying side can cost you your status on the receiving side. CIS340: If a contractor fails to operate the scheme correctly, we may cancel the contractor’s own gross payment status if the contractor also operates as a subcontractor.

Late monthly CIS returns count against you in the review too. Here are the monthly return deadlines.

Do I keep gross payment status if I set up a limited company?

No. When you move from sole trader to a company or partnership, or the other way round, GOV.UK says: If you have gross payment status, you’ll need to apply again. The good news is that the turnover you built up before can count: The new company may use the ‘Inherited Receipts’ test based on previous turnover to satisfy the turnover test.

A company that already has it must also tell HMRC about new shareholders. GOV.UK says to report it when you add new shareholders - HMRC may withdraw your gross payment status if you do not tell them within 30 days.

Other questions about gross payment status

GOV.UK: If HMRC give you more time to pay, this will not affect your gross payment status. CIS340: If a subcontractor is to change from gross payment to payment under deduction, or the other way round, we’ll tell the subcontractor and the contractor.