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, subject to full CIS compliance requirements, also referred to as maintaining correct cis tax status.
For subcontractors, CIS gross payment status can improve cash flow because contractors pay qualifying invoices without making the standard CIS deduction at source. The subcontractor remains responsible for meeting its tax obligations and maintaining the HMRC conditions attached to the status.
To qualify, HMRC requires subcontractors to meet specific business, turnover, and compliance tests, and to continue meeting them on an ongoing basis. This includes maintaining eligibility for gross payment status cis and ensuring ongoing cis gross status compliance, often with support from a cis accountant to help manage reporting, records, and HMRC requirements correctly.
CIS Gross Payment Status: Quick Eligibility Check
CIS gross payment status allows qualifying subcontractors to receive payments from contractors without standard CIS deductions being taken at source. To qualify, your business must pass HMRC’s business, turnover and compliance tests.
In general, HMRC will check that:
- your business carries out construction work or supplies labour for construction work in the UK;
- the business operates through a bank account;
- your net construction turnover meets the required threshold; and
- your tax and National Insurance compliance meets HMRC’s requirements.
Gross payment status does not remove your tax obligations. Instead of contractors deducting CIS tax before paying you, you receive qualifying payments gross and remain responsible for reporting the income and paying the relevant tax and National Insurance through the appropriate tax return.
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, and may seek support from a cis accountant to ensure correct application of the rules and compliance with wider cis tax services requirements.
For a complete overview of how the Construction Industry Scheme is structured, who it applies to, and what obligations it creates for both contractors and subcontractors, read our full guide to the Construction Industry Scheme.
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 for all cis tax deductions, tax, and National Insurance at the end of the tax year, including accurate cis tax return reporting and maintaining their overall cis tax status with HMRC.
Where CIS gross payment status has been approved, the payment process changes because the contractor can make qualifying payments without deducting the usual CIS percentage. This does not remove the subcontractor’s wider tax and reporting responsibilities.
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, forming part of wider CIS work obligations and eligibility for gross payment status cis under HMRC rules.
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 through HMRC systems, often managed via a CIS Government Gateway account, ensuring proper cis verification before approval.
Many contractors and subcontractors also choose to work with a tax accountant in London to ensure CIS deductions, gross payment applications, and year-end reporting are handled correctly. This helps reduce compliance risks and avoid unnecessary HMRC penalties.
CIS Gross Payment vs 20% and 30% CIS Deductions
| CIS status | Typical deduction from qualifying payment | What it means |
|---|
| Gross payment status | No CIS deduction | The contractor normally pays the qualifying amount without CIS tax being deducted at source. |
| Registered subcontractor without gross payment status | 20% | The contractor normally deducts CIS tax and pays it to HMRC. |
| Unregistered subcontractor | 30% | A higher CIS deduction generally applies until the subcontractor is properly registered and verified. |
CIS deductions are advance payments towards the subcontractor’s tax and National Insurance liabilities. Gross payment status mainly changes when the tax is collected rather than removing the underlying tax liability.
What Is CIS 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.
Receiving CIS gross payment does not mean the income is tax-free. It means tax is not deducted by the contractor at the point of payment, leaving the subcontractor responsible for accounting for the relevant tax liabilities through its normal tax reporting.
The HMRC Tests for CIS Gross Payment Status
HMRC considers three main areas when deciding whether a subcontractor qualifies for GPS, and maintaining CIS compliance is essential throughout the assessment process:
- 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. Understanding how HMRC’s verification procedures work is equally important at this stage — read our guide on the process of verifying subcontractors through HMRC’s CIS system to ensure your records and status are correctly confirmed before applying.
Meeting the initial tests is important because CIS gross status depends on more than turnover alone. HMRC also considers the subcontractor’s compliance history, making accurate returns and timely tax payments important both when applying and after approval.
1. CIS Gross Payment Status Business Test
To pass the business test, you need to show HMRC that your business carries out construction operations in the UK, or supplies labour for construction operations, and that the business is operated through a bank account.
2. CIS Gross Payment Status Turnover Test
HMRC looks at your net construction turnover for the 12 months before the application. Net construction turnover broadly means qualifying UK construction turnover excluding VAT and after deducting the direct cost of materials used to earn that turnover.
Under the standard turnover test, the minimum thresholds are generally:
- Sole trader: at least £30,000.
- Partnership: at least £30,000 for each partner, or at least £100,000 for the partnership as a whole.
- Company: at least £30,000 for each relevant person/director under the applicable test, or at least £100,000 for the company as a whole.
Additional turnover-test rules can apply depending on the business structure and circumstances, so businesses close to the threshold should check which HMRC test applies before submitting an application.
3. CIS Gross Payment Status Compliance Test
HMRC also reviews the subcontractor’s tax compliance history. This test considers whether relevant tax obligations, returns and payments have been dealt with correctly and on time, subject to the statutory rules and permitted tolerances.
Passing the turnover test alone is therefore not enough. A subcontractor must satisfy the applicable business, turnover and compliance requirements before HMRC grants gross payment status.
How to Apply for CIS Gross Payment Status
You can apply for CIS gross payment status when registering as a subcontractor or, if you are already registered under CIS, by using the appropriate HMRC application route for your business structure.
- Confirm your CIS position. Check that your business carries out work covered by the Construction Industry Scheme.
- Check the three qualification tests. Review your business activity, net construction turnover and tax compliance before applying.
- Gather your information and evidence. HMRC may require details of turnover, the business bank account and evidence supporting the figures entered on the application.
- Use the correct application for your business structure. HMRC provides different application routes for sole traders, partnerships and limited companies.
- Submit accurate information. Make sure turnover and business details can be supported by your records.
- Respond to HMRC if evidence is requested. HMRC can carry out checks to substantiate information supplied in the application.
If HMRC approves the application, contractors can verify your tax treatment and make qualifying payments without the standard CIS deduction. You must then continue meeting the relevant tax and compliance requirements to retain gross payment status.
For subcontractors or contractors unsure about meeting these conditions, a CIS accountant in London can help assess compliance, review records, and ensure all HMRC requirements are correctly met before you apply for gross cis status or maintain existing approval.
What Do You Need to Apply for CIS Gross Payment Status?
The exact information required depends on whether you are applying as a sole trader, partnership or company. Before applying, you should normally have relevant business and tax information available, which may include:
- your Unique Taxpayer Reference (UTR);
- National Insurance details where applicable;
- business bank account details;
- your turnover for the relevant 12-month period;
- evidence supporting your turnover, such as invoices, bank statements, contracts or payment and deduction statements;
- VAT information where applicable; and
- details of partners, directors or relevant persons where required for the business structure.
Keep the supporting records used for your application. HMRC may carry out evidence checks after gross payment status has been granted to confirm that the information supplied was accurate.
Ongoing Compliance Requirements
Gross Payment Status is not permanent. HMRC regularly reviews whether subcontractors continue to meet the qualifying conditions, and ongoing CIS compliance is required to retain status.
Late tax returns, missed payments, or changes in business activity can result in Gross Payment Status being withdrawn.
Maintaining CIS gross payment status therefore requires ongoing attention after an application has been approved. Subcontractors should continue meeting their filing and payment obligations rather than treating gross status as a one-off qualification.
Does HMRC Review CIS Gross Payment Status?
Yes. Receiving gross payment status is not the end of the compliance process. HMRC carries out scheduled reviews to check whether businesses with gross payment status continue to meet the required standards.
This means subcontractors should continue to keep tax returns, payments and relevant CIS obligations up to date and maintain records supporting their construction turnover. Changes in turnover or compliance can affect whether gross payment status is retained.
Businesses should therefore treat CIS gross payment status as an ongoing compliance responsibility rather than a one-off approval.
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. HMRC explains the qualifying conditions and ongoing requirements for Gross Payment Status under CIS on
GOV.UK.
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
In many cases, applications fail because the subcontractor’s CIS registration and compliance history is not in order before applying. If you have not yet registered for CIS or want to understand the benefits of doing so before pursuing gross payment status, read our step-by-step guidance on registering for CIS and the benefits.
Reviewing these areas before applying for CIS gross payment status can help identify compliance or record-keeping issues that may otherwise affect HMRC’s decision.
What Happens if HMRC Refuses Gross Payment Status?
If HMRC refuses an application for gross payment status, it will explain why the qualifying conditions were not met. A failure may relate to the business test, turnover test, compliance test or the information supplied with the application.
Before responding to a refusal, check the figures and records HMRC used against your own accounts, CIS records and supporting evidence. If you believe HMRC’s decision is incorrect, review the appeal or review rights provided with the decision rather than simply submitting the same information again.
Case Study: Preparing a Subcontractor for Gross Payment Status
Michael approached our Wimbledon office after several years of working as a CIS subcontractor. His contractors were deducting 20% CIS tax from qualifying payments, which was creating considerable pressure on cash flow even though his construction business was profitable.
Michael wanted to apply for CIS Gross Payment Status so contractors could pay him without making the standard CIS deductions. Before submitting an application, Cigma Accounting reviewed whether his business met HMRC’s relevant qualifying conditions rather than assuming that sufficient turnover alone would secure approval.
We reviewed Michael’s construction turnover, CIS registration and recent tax compliance history. His turnover met the relevant requirement, but our review identified an outstanding tax payment and a previous filing issue that needed attention. We explained that HMRC’s compliance test is an important part of the Gross Payment Status assessment and that unresolved compliance problems could affect an application.
Our team helped Michael bring his records and outstanding obligations up to date before proceeding. We also reviewed his CIS accounting, Self Assessment, bookkeeping and tax payment planning so that obtaining gross status would not simply replace CIS deductions with unexpected tax liabilities later in the year.
Once his position was better organised, Michael could approach the application with clearer evidence supporting his turnover and compliance history. We also explained that Gross Payment Status requires ongoing CIS compliance, as HMRC can review the position and withdraw the status where the necessary conditions are no longer satisfied.
Michael was left with stronger CIS records, a clearer understanding of his tax responsibilities and a more structured approach to protecting the cash-flow benefits that Gross Payment Status could provide.
