CIS Gross Payment Status: How to Apply and What It Means

The Accounted Business Team·1 March 2026·7 min read

If you work as a subcontractor in construction, there is a good chance 20% of your pay is being deducted before it reaches your bank account. That money goes to HMRC as advance tax payments, and you get it back when you file your tax return. But waiting months for your own money is not great for cash flow. Gross payment status means contractors pay you in full — no deductions. Here is everything you need to know about getting it and keeping it for the 2025/26 tax year.

What Is Gross Payment Status?

Under the Construction Industry Scheme (CIS), contractors must deduct a percentage from payments to subcontractors and send it to HMRC. The standard deduction rate for registered subcontractors is 20%. If you are not registered, it jumps to 30%.

Gross payment status is a special CIS registration that tells contractors to pay you the full amount — 0% deduction. HMRC grants it to subcontractors who meet certain conditions and have a good compliance record.

The deductions are not a tax in themselves. They are advance payments towards your Income Tax and National Insurance (or Corporation Tax for limited companies). You claim them back on your tax return. But that means your money is tied up with HMRC for months while you wait. For a subcontractor billing £10,000 a month in labour, that is £2,000 a month sitting with HMRC instead of in your business.

Why Gross Payment Status Matters

Better cash flow

This is the big one. Without gross payment status, a sole trader plumber invoicing £5,000 for labour only receives £4,000 after the 20% deduction. Over a year, that is £12,000 held by HMRC. With gross payment status, you get the full £5,000 every time.

You still owe the same tax at the end of the year. But having the money in your account means you can pay for materials, cover fuel costs, and handle quiet months without running short.

Simpler invoicing and professional credibility

With gross status, invoices and payments are more straightforward — no deduction calculations, no confusion about net versus gross amounts. It also signals to contractors that HMRC considers you a compliant, established business.

The Three Tests You Must Pass

HMRC will only grant gross payment status if you meet three conditions: the business test, the turnover test, and the compliance test.

The business test

You must carry on a business in the United Kingdom that includes construction work. This is straightforward — if you are working as a subcontractor in construction, you pass this test.

The work does not have to be your only source of income, but construction must be a genuine part of what you do. Someone who did one odd job three years ago would not qualify.

The turnover test

Your net construction turnover — that is your turnover from construction work, excluding VAT and the cost of materials — must reach a minimum threshold.

For sole traders: At least £30,000 in the 12 months before you apply.

For partnerships: At least £30,000 per partner. So a two-person partnership needs £60,000 in net construction turnover.

For limited companies: At least £30,000 per relevant person (usually each director). A company with two directors needs £60,000.

If you are a new business and do not yet have 12 months of trading history, HMRC may consider your projected turnover, but they are generally cautious about this. It is usually easier to wait until you have a full year's figures.

The compliance test

This is where most applications fail. HMRC checks your record over the 12 months before your application and looks for:

Tax returns filed on time. Your Self Assessment returns (or CT600 for companies) must have been submitted by the deadline. Even one late return can be enough for HMRC to refuse your application.

Tax paid on time. Any tax you owed must have been paid by the due date. This includes Income Tax, National Insurance, Corporation Tax, PAYE, and CIS deductions if you are also a contractor. HMRC does allow some minor slip-ups — a payment that was a few days late and quickly corrected may be overlooked — but they take a strict approach.

No serious penalties. If you have been hit with penalties for fraud, negligence, or deliberate non-compliance, your application is very likely to be refused.

HMRC looks at all the taxes you are responsible for, not just CIS. If your VAT returns are late but your Self Assessment is spotless, the late VAT returns can still sink your application.

How to Apply for Gross Payment Status

When to apply

You can apply for gross payment status when you first register as a CIS subcontractor, or at any point afterwards. If you are not sure you meet the criteria yet, it is better to register at the standard 20% rate first and apply for gross status later once you have a clean 12-month record.

The application process

For sole traders and partnerships: Call HMRC's CIS helpline on 0300 200 3210. You cannot currently apply online. Have your UTR, National Insurance number, and turnover figures ready. HMRC may ask for your bank details and the names of contractors you work for.

For limited companies: You can apply online through the Government Gateway, or by phone.

HMRC typically processes applications within a few weeks, but it can take longer if they need to verify your turnover or check your compliance record. If approved, your CIS registration is updated and contractors will see the 0% deduction rate when they verify you.

If your application is refused

HMRC will write to you explaining why. The most common reason is failing the compliance test — a late return or late payment. You can appeal the decision if you think HMRC has it wrong, but you will need evidence to support your case.

If the refusal is because of a genuine compliance issue, fix the problem and reapply after 12 months when you have a clean record.

Keeping Gross Payment Status

Getting gross status is one thing. Keeping it is another. HMRC reviews all gross payment status holders regularly — typically once a year — and they will remove your status if you no longer meet the criteria.

What triggers a review

HMRC runs automated checks, but certain things are more likely to trigger a detailed review:

A Self Assessment or Corporation Tax return filed late
A tax payment made after the deadline
A change in your business circumstances (new partners, change of director)
A significant drop in construction turnover

What happens if you lose it

If HMRC removes your gross payment status, you go back to the standard 20% deduction rate. Contractors are notified the next time they verify you, so the change takes effect quickly.

You can appeal the removal if you think it is wrong. And you can reapply once you have another 12 months of clean compliance. But the cash flow hit in the meantime can be painful, so prevention is far better than cure.

How to protect your status

File every return early. Do not wait until the deadline. File your Self Assessment, VAT returns, and any employer returns well ahead of time.

Pay every tax bill on time. Set up direct debits where possible so payments go out automatically. If you cannot pay in full, contact HMRC before the deadline to arrange a Time to Pay agreement — this can show willing even if you are struggling.

Keep your records up to date. If HMRC queries your turnover or asks for evidence, you need to be able to respond quickly. Having your books in order means no last-minute scramble.

Tell HMRC about changes. If you take on a new partner, change your company directors, or move address, update HMRC promptly. Failing to notify them of changes can count against you.

Gross Payment Status for Limited Companies

For limited companies, the turnover test applies per director — one director needs £30,000, three directors need £90,000 in net construction turnover. The compliance test covers Corporation Tax, PAYE, and CIS obligations. CIS deductions suffered can be offset against PAYE and CIS liabilities in-year, but the process is complex — good software or professional advice is worth having.

Tracking Your CIS Record with Accounted

Staying on top of every deadline is the single most important thing you can do to get and keep gross payment status. Accounted makes this easier by tracking your income, expenses, and tax obligations in one place. Penny, the AI bookkeeper, can alert you to upcoming filing deadlines and help you spot potential problems before they cost you your gross status.

If you are a construction subcontractor who wants to get paid in full without the 20% haircut, start by getting your records straight. Try Accounted's free trial and let Penny help you build the clean compliance record that HMRC wants to see.

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