CIS Gross Payment Status: How to Qualify and Why It Matters

What Is Gross Payment Status?

Gross Payment Status (GPS) is a CIS registration status that allows subcontractors to receive payments from contractors without any tax deductions being made. Instead of having 20% (or 30%) taken from the labour portion of every payment, you receive the full gross amount.

You still owe tax — GPS does not exempt you from income tax or National Insurance. But it means you keep control of your cash flow throughout the year and settle your tax through Self Assessment at the end of the year, rather than having it deducted at source.

For many established construction businesses, GPS is transformative. The difference between receiving £10,000 and receiving £8,000 (after a 20% deduction) can be the difference between meeting payroll, buying materials for the next job, and keeping the business running smoothly.

Why GPS Matters for Your Business

Cash Flow

This is the primary benefit. Construction businesses often operate on tight margins with significant upfront costs. Materials must be purchased, workers must be paid, and equipment must be hired — all before the final payment arrives. Having 20% of every payment held back by HMRC creates a persistent cash flow gap.

With GPS, you receive the full payment immediately. You can use that money to fund the next job, invest in equipment, or simply maintain a healthier cash position. You will still pay the same amount of tax eventually, but you control when and how.

Reduced Administration

Without GPS, you need to carefully track every CIS deduction, reconcile statements from multiple contractors, and ensure the correct amounts are credited on your Self Assessment. With GPS, your invoicing and payment collection work like any other business — simpler and cleaner.

Professional Credibility

GPS signals to contractors and the wider industry that you are a compliant, established business. HMRC only grants GPS to subcontractors who meet strict criteria, so having it demonstrates a track record of tax compliance and financial stability.

Competitive Advantage

Some contractors prefer working with GPS subcontractors because it reduces their administrative burden. They do not need to calculate deductions, issue payment and deduction statements (beyond a basic receipt), or include GPS payments in their monthly CIS returns in the same way. This can make you a more attractive subcontractor to work with.

The Three Tests for GPS

To qualify for Gross Payment Status, you must pass three tests set by HMRC:

1. The Business Test

You must be carrying on a business in the UK that includes construction work. This is usually straightforward for anyone already operating as a subcontractor, but you must be able to demonstrate that your construction activities constitute a genuine business rather than occasional or hobby work.

For sole traders, you must be carrying on a trade or business. For partnerships, the partnership must carry on a trade or business. For limited companies, the company must carry on a business.

2. The Turnover Test

Your construction turnover must meet minimum thresholds:

• Sole traders: at least £30,000 per year from construction work (excluding VAT and materials)
• Partnerships: at least £30,000 per partner per year
• Companies: at least £30,000 per director per year, or £200,000 total annual turnover (whichever is lower)

The turnover must come from construction operations within the scope of CIS. Income from non-construction activities does not count towards this threshold.

If you are a new business and do not yet have a full year of turnover history, HMRC may consider projected turnover based on existing contracts. However, in practice, new businesses often need to wait until they can demonstrate the required level of activity.

3. The Compliance Test

This is the test that catches most applicants and the most common reason for GPS being refused or withdrawn. You must demonstrate a clean compliance record with HMRC, which means:

• All tax returns filed on time — Self Assessment, Corporation Tax, VAT returns, CIS returns, PAYE returns. Every single one must have been submitted by the deadline.
• All tax paid on time — income tax, National Insurance, Corporation Tax, VAT, CIS deductions owed. Any late payments count against you.
• No outstanding tax debts — you must be up to date with all tax obligations.

HMRC will look at your compliance record for the 12 months before your application. Even a single late filing can result in refusal.

There are limited exceptions for minor delays (HMRC may overlook a payment that was a few days late in certain circumstances), but the safest approach is to assume that any non-compliance will count against you.

How to Apply for GPS

For Sole Traders

You can apply when you first register for CIS, or at any time afterwards. The application is made through HMRC's online CIS service or by calling the CIS helpline.

You will need:

• Your Unique Taxpayer Reference (UTR)
• Your National Insurance number
• Your business details, including the types of construction work you carry out
• Evidence of your turnover if requested

For Limited Companies

Companies apply through the online CIS service using the company's UTR and company registration number. All directors must meet the compliance test individually.

For Partnerships

Each partner must meet the compliance test, and the partnership as a whole must meet the turnover test. Apply through the CIS helpline or online service.

Processing Time

HMRC typically processes GPS applications within 6 weeks, though it can take longer during busy periods. You will receive a decision in writing. If approved, your GPS status takes effect from the date of approval — it is not backdated.

Maintaining Your GPS

Getting GPS is only half the battle. HMRC conducts annual reviews of all GPS holders, typically between September and March. During the review, they check:

• Whether you still meet the turnover test
• Whether your compliance record remains clean
• Whether your business is still carrying on construction activities

What Can Cause GPS to Be Withdrawn?

• Filing a tax return late
• Paying tax late
• Accumulating a tax debt
• Ceasing construction activities
• Your turnover dropping below the threshold

The Consequences of Losing GPS

If HMRC decides to withdraw your GPS, they will write to you with 90 days' notice. During this period, you can appeal if you believe the decision is wrong. If the withdrawal goes ahead, you revert to the standard 20% deduction rate (assuming you are still registered for CIS).

Losing GPS is disruptive. Your contractors will need to be informed, and they will have to start making deductions from your payments. Your cash flow will take an immediate hit. Regaining GPS later is possible but requires a fresh application and a clean compliance record.

Strategies for Maintaining GPS

1. Never Miss a Filing Deadline

Set up reminders for every tax deadline — Self Assessment (31 January), VAT returns (monthly or quarterly), CIS returns (19th of each month if you are also a contractor), and PAYE submissions. Use accounting software that alerts you to upcoming deadlines.

2. Pay Tax on Time

Set aside money for tax as you earn it. A good rule of thumb is to ring-fence 25-30% of your profit each month into a separate savings account dedicated to tax. This way, when the payment deadline arrives, the money is already there.

3. Use Direct Debits for VAT and PAYE

Where possible, set up direct debits for tax payments. This removes the risk of forgetting or being unable to pay on the due date.

4. File Returns Early

There is no penalty for filing early, but there are penalties for filing late. Get into the habit of completing returns as soon as the information is available, rather than waiting until the last minute.

5. Monitor Your Compliance

Regularly check your HMRC online account to ensure there are no unexpected demands, penalties, or outstanding issues that could affect your GPS review.

GPS and Limited Companies: Special Considerations

For limited companies, every director must individually pass the compliance test. This means that if one director has a personal tax issue — such as a late Self Assessment return — it can affect the company's GPS status. Before appointing a new director, consider their personal tax compliance history.

Similarly, if you are a director of multiple companies, your personal compliance affects all of them. One late filing on your personal tax can cascade across every company you direct.

Common Reasons GPS Applications Are Refused

1. Late Self Assessment filing — the single most common reason
2. Outstanding tax debts — even small amounts
3. Late VAT return — one late return in the past 12 months can be enough
4. Insufficient turnover — not meeting the £30,000 threshold
5. Director compliance issues — a director's personal non-compliance affecting the company

Can You Appeal a GPS Decision?

Yes. If your application is refused or your GPS is withdrawn, you have the right to appeal. You must appeal within 30 days of the decision. Appeals can be made to HMRC first (asking them to review the decision) and then to the First-tier Tribunal if you disagree with the review outcome.

Common grounds for appeal include:

• HMRC made a factual error (for example, a return was filed on time but not recorded correctly)
• You had a reasonable excuse for late filing (serious illness, bereavement, fire or flood)
• The compliance failure was minor and has since been rectified

How Accounted Supports GPS Holders

Maintaining Gross Payment Status requires impeccable compliance. Accounted helps by:

• Tracking all deadlines — Penny sends smart reminders for Self Assessment, VAT, and CIS deadlines before they arrive
• Keeping your books up to date — real-time transaction categorisation means your records are always current
• Automating CIS records — if you are also a contractor, Accounted manages your monthly returns
• Tax forecasting — see your estimated tax bill throughout the year so you can set aside the right amount
• Flagging compliance risks — if something could jeopardise your GPS, you will know about it early

Explore our plans and pricing to see which tier is right for your construction business.

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Protect your cash flow and your GPS. Sign up for Accounted and keep your CIS compliance on track — Penny will make sure nothing slips through the cracks.