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CIS gross payment status lets contractors pay you in full, with no 20% deduction taken from your labour. To get gross payment status you must pass three HMRC tests: a business test, a turnover test (usually at least £30,000 of construction labour in the last 12 months, after VAT and materials) and a compliance test showing you have filed and paid your tax on time.
For a busy subcontractor, gross payment status can transform cash flow. Instead of waiting until after the tax year for a CIS refund, you keep the money each month and pay your own tax through Self Assessment or Corporation Tax. This guide explains who qualifies, how to apply, the 2026 rule changes and whether gross payment status is right for you.
What is CIS gross payment status?
Under the Construction Industry Scheme, contractors must deduct tax from payments to subcontractors and pass it to HMRC. There are three rates:
| CIS status | Deduction from labour |
|---|---|
| Registered subcontractor | 20% |
| Not registered | 30% |
| Gross payment status | 0% |
With gross payment status, contractors still verify you with HMRC and report what they paid you on their monthly CIS return, but they do not deduct any tax. You then account for all your own tax at the end of the year. If you are new to the scheme, our guide to the Construction Industry Scheme explains the basics.
Who qualifies for gross payment status?
HMRC applies three tests. You must pass all of them.
1. The business test
You must carry out construction work, or provide labour for construction work, in the UK, and run your business through a bank account. Most active subcontractors pass this easily.
2. The turnover test
Your construction turnover over the 12 months before you apply, excluding VAT and the cost of materials, must be at least:
| Business type | Turnover test |
|---|---|
| Sole trader | £30,000 |
| Partnership | £30,000 per partner, or £100,000 for the whole partnership |
| Limited company | £30,000 per director, or £100,000 for the whole company |
Only the labour element counts. If you invoice £45,000 but £18,000 of that is materials, your qualifying turnover is £27,000 and you would not pass as a sole trader.
3. The compliance test
You must have met your tax obligations on time over the previous 12 months. HMRC looks at your Self Assessment or Corporation Tax returns and payments, PAYE and CIS returns if you employ people or pay subcontractors, and VAT returns and payments. VAT has formed part of the compliance test since April 2024.
HMRC allows a small number of minor lapses, but repeated late filing or late payment will usually lead to refusal. Keeping on top of deadlines for the year before you apply is the single most important step.
How to apply for gross payment status
You can apply online through your HMRC business tax account, using the CIS section, or by phoning the CIS helpline. Have these ready:
- Your Unique Taxpayer Reference (UTR) and National Insurance number, or company registration number. See what a UTR is and where to find it.
- Details of your business bank account.
- Evidence of your turnover for the last 12 months, such as invoices and CIS payment and deduction statements.
- Details of all partners or directors, if you are not a sole trader.
HMRC usually decides within a few weeks. If you are refused, it will tell you which test you failed, and you can appeal within 30 days or reapply once you meet the tests.
The 2026 changes: why compliance matters more than ever
HMRC already had the power to remove gross payment status immediately where it suspects fraud. From April 2026, the consequences have become tougher. Businesses that lose gross payment status because they knew, or should have known, that payments were connected to fraud can face penalties and be barred from reapplying for up to five years.
HMRC also reviews every business with gross payment status regularly to check it still meets the tests. If you start filing returns late or fall behind on payments, you can lose the status at the next review and drop back to 20% deductions.
Gross payment status vs a CIS refund: which is better?
Gross payment status is not right for everyone. Compare the two.
| Gross payment status | 20% deductions with a refund | |
|---|---|---|
| Cash flow | Paid in full each month | 20% held by HMRC until you claim it back |
| Tax payments | You pay your own tax in January and July | Tax already taken, refund usually due |
| Discipline needed | You must set money aside for tax | Deductions act as forced saving |
| Admin | Annual HMRC reviews, strict deadlines | Standard Self Assessment return |
Worked example
Lee is a self-employed joiner in Bolton earning £60,000 of labour a year, with £10,000 of expenses.
| With 20% CIS deductions | With gross payment status | |
|---|---|---|
| CIS deducted during the year | £12,000 | £0 |
| Income tax and Class 4 NI on £50,000 profit | £9,732 | £9,732 |
| Position after the tax return | Refund of £2,268 | £9,732 to pay, plus payments on account |
With deductions, £12,000 is tied up with HMRC during the year and Lee waits for a £2,268 refund. With gross payment status, Lee has the full £60,000 to run the business but must set aside around £810 a month to pay his tax bill. If the business needs cash for materials, tools or a van, gross status is worth having. If saving for tax is a struggle, deductions can be the safer option.
The figures are illustrative, using 2026/27 rates in England with no other income. Lee would also need to budget for payments on account once he pays his own tax.
How to keep gross payment status
- File every Self Assessment, Corporation Tax, VAT and CIS return on time.
- Pay tax in full by the due date, or agree a Time to Pay arrangement before it is late.
- Keep your bank details and business address up to date with HMRC.
- Check every contractor you work for is legitimate and pays through proper channels.
- Set aside tax from every payment, so your January bill is covered.
Frequently asked questions
How long does it take to get CIS gross payment status?
HMRC usually reviews an application within a few weeks, provided your records are complete. Contractors must then verify you again to see the new status.
Can a new business get gross payment status?
Usually not straight away, because you need 12 months of construction turnover and a compliance record. Some new companies can qualify using the directors’ own records, but most subcontractors apply after their first full year.
Do materials count towards the £30,000 turnover test?
No. The turnover test only counts the labour element of your work, excluding VAT and the cost of materials.
What happens if I lose gross payment status?
Contractors will start deducting 20% from your labour, and you can usually reapply after 12 months if you meet the tests again. Where HMRC removes the status because of fraud, the bar on reapplying can last up to five years.
Do I still need an accountant with gross payment status?
You still need to file a Self Assessment or company tax return and pay your tax on time to keep the status, and HMRC reviews you regularly. An accountant keeps your filings on time and tells you what to set aside each month.
Get help with CIS
Cangaf’s CIS accountants help Bolton subcontractors and building firms check whether they qualify, apply for gross payment status and keep their compliance record clean. If you are staying on 20% deductions, we will make sure you claim back every pound you are owed. Use our CIS tax rebate calculator for an estimate, read how to claim CIS repayments, or get a fixed-fee quote.
Official guidance: Construction Industry Scheme: what is CIS, HMRC CIS 340 guide for contractors and subcontractors and Register for CIS as a subcontractor and apply for gross payment status.
Related guides: The Director’s Exit Ramp: Year-End Tax Planning Moves to Make Before 5 April · What Is Turnover
