Qualifying for Gross Payment Status Under the Construction Industry Scheme
Gross Payment Status (GPS) allows qualifying subcontractors under the
Construction Industry Scheme (CIS) to be paid without tax deductions being taken from their payments.
To qualify, HMRC requires subcontractors to meet specific business, turnover, and compliance tests, and to continue meeting them on an ongoing basis.
How the Construction Industry Scheme (CIS) Deduction and Gross Payment Rules Work
Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance. Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment.
Subcontractors do not have to register for the CIS, but contractors must deduct 30% from their payments to unregistered subcontractors. The alternative is to register as a CIS subcontractor where a 20% deduction is taken or to qualify for gross payment status whereby the contractor will not make any deductions, and the subcontractor is responsible to pay all their tax and National Insurance at the end of the tax year.
To qualify for gross payment status a subcontractor must meet certain criteria, including having paid their tax and National Insurance on time in the past and have a business that undertakes construction work (or provides labour for it) in the UK.
The subcontractor must also have a turnover of at least £30,000 for a sole trader (or higher depending on the structure of your business). An application for gross payment status can be made online or by post.
What Is Gross Payment Status?
Subcontractors with Gross Payment Status are paid in full by contractors, rather than having
CIS deductions taken at source.
This status is not automatic and must be applied for. HMRC will assess whether the subcontractor meets all qualifying conditions before granting approval.
The HMRC Tests for Gross Payment Status
HMRC considers three main areas when deciding whether a subcontractor qualifies for GPS:
- The business test – confirming the business is operating in the construction industry
- The turnover test – checking that construction turnover meets the minimum threshold
- The compliance test – ensuring tax returns and payments have been submitted on time
All tests must be satisfied for Gross Payment Status to be granted.
Ongoing Compliance Requirements
Gross Payment Status is not permanent. HMRC regularly reviews whether subcontractors continue to meet the qualifying conditions.
Late tax returns, missed payments, or changes in business activity can result in Gross Payment Status being withdrawn.
What Happens If Gross Payment Status Is Lost?
If Gross Payment Status is withdrawn, contractors must restart CIS deductions on payments made to the subcontractor.
This can affect cash flow and may require the subcontractor to reapply once compliance issues have been resolved.
Common Reasons Applications Fail
Applications for Gross Payment Status commonly fail where:
- Construction turnover does not meet HMRC thresholds
- Tax returns have been filed late
- Outstanding tax liabilities exist
- Records do not support ongoing construction activity
HMRC Guidance on Gross Payment Status
HMRC explains the qualifying conditions and ongoing requirements for Gross Payment Status under CIS on
GOV.UK.
Do You Qualify for Gross Payment Status?
Whether a subcontractor qualifies for
Gross Payment Status will depend on meeting all HMRC conditions and maintaining ongoing compliance over time. For contractors and subcontractors in
Farringdon and nearby areas such as
Aldgate and
Liverpool Street,
CIGMA Accounting can help review eligibility, monitor compliance, and support applications to reduce the risk of deductions being applied incorrectly.
