If you have been working as a CIS subcontractor for a while, you may have heard other tradespeople talk about gross payment status and how much better it is for cash flow. They are right. Having CIS deductions removed entirely from your payments means you take home the full invoice amount and settle your tax bill yourself at the end of the year. This guide explains what gross payment status is, whether you qualify, and how to apply.
Quick Answer: What Is Gross Payment Status?
Gross payment status (GPS) allows CIS subcontractors to receive payments in full without any tax deducted at source. Instead of the standard 20% CIS deduction, contractors pay you the full amount on your invoices. You then manage your own tax payments through Self Assessment. HMRC grants gross payment status to subcontractors who meet specific turnover and compliance tests.
Why Gross Payment Status Matters
Under standard CIS, a contractor deducts 20% from your labour payments before paying you. If you invoice £10,000 in a month, you receive £8,000, with £2,000 going to HMRC on your behalf.
With gross payment status, you receive the full £10,000. You still owe tax on your profits at the end of the year, but you hold the money throughout the year and pay it when your Self Assessment bill is due. For anyone with consistent income, this can make a meaningful difference to working capital.
Who Qualifies for Gross Payment Status?
HMRC applies three tests before granting gross payment status:
The Business Test
You must carry out construction operations in the UK, either as a sole trader, partnership, or limited company. The business must be genuinely commercial.
The Turnover Test
You need to have a minimum level of net construction turnover, meaning income from construction work after deducting materials:
- Sole traders: At least £30,000 per year
- Partnerships: At least £30,000 per partner, or £100,000 for the partnership as a whole
- Limited companies: At least £30,000 per director involved in the business, or £100,000 for the company as a whole
New businesses that cannot meet the turnover test yet may still be granted gross payment status if they can demonstrate they will reach these levels.
The Compliance Test
This is the one that most people either pass or fail. HMRC looks at your compliance record over the previous 12 months and checks that:
- All Self Assessment tax returns have been filed on time
- All tax payments have been made on time
- All CIS returns (if you are also a contractor) have been submitted on time
- There are no outstanding tax debts
HMRC can also look back further if they have concerns. Even a single late payment in the relevant period can result in a refusal.
How to Apply for Gross Payment Status
You apply directly to HMRC. There are two ways:
- Online: Log in to your Government Gateway account and apply through the CIS section
- By phone: Call HMRC on 0300 200 3210
HMRC will review your application against the three tests above and write to you with their decision. The process typically takes a few weeks, though it can be quicker.
If your application is approved, HMRC updates their system and contractors can verify your gross status the next time they check. From that point on, they must pay you in full.
What Happens After You Get Gross Payment Status?
You are responsible for managing and paying your own tax. This means:
- Filing your Self Assessment tax return each year by 31 January
- Making payments on account if HMRC requires them (usually if your bill is above £1,000)
- Keeping proper records of all income and allowable expenses throughout the year
With full payments coming in, it is important to set money aside regularly rather than spending everything and facing a large tax bill in January. A good rule of thumb is to put aside around 25 to 30% of your net profit as you go.
Can Gross Payment Status Be Removed?
Yes. HMRC reviews gross payment status annually and can withdraw it if your compliance record slips. Common reasons for removal include:
- Late Self Assessment returns or payments
- Outstanding tax debts
- Failure to notify HMRC of changes to your business
If your gross payment status is cancelled, you will be moved back to the 20% deduction rate. You can reapply after 12 months, but only once you have a clean compliance record again.
Gross Payment Status vs Standard CIS: A Comparison
| Standard CIS (20%) | Gross Payment Status | |
|---|---|---|
| Tax deducted by contractor | Yes | No |
| Monthly cash flow | Reduced by 20% | Full invoice received |
| Tax paid | In advance via deductions | Via Self Assessment |
| Annual refund likely | Often yes | No (you manage it yourself) |
| Admin required | Lower | Higher |
Is Gross Payment Status Right for You?
For most established subcontractors with a steady workload and good payment habits, gross payment status improves cash flow significantly. However, it also requires more discipline around setting aside money for your tax bill.
If you are newer to the industry or your compliance record is not yet spotless, you may find it more straightforward to stay on the standard 20% rate for now and apply once your record is cleaner.
It is always worth speaking to an accountant before applying, particularly to make sure your compliance is in order and there are no surprise gaps in your filing history.
Typical Costs for CIS Tax Advice in Kent
| Service | Typical Cost |
|---|---|
| Gross payment status application assistance | £100 to £200 |
| Annual CIS Self Assessment return | £150 to £350 |
| CIS compliance review | £150 to £250 |
Frequently Asked Questions
Can I apply for gross payment status if I have only been trading for a few months?
You can apply, but you will need to provide evidence of expected turnover and HMRC will look carefully at your projected figures. In practice, most successful applications come from subcontractors who have been trading for at least a year with a clean compliance record.
Does gross payment status affect my National Insurance contributions?
No. NIC is paid through your Self Assessment return regardless of whether you are on standard CIS or gross payment status. CIS deductions only relate to Income Tax.
What if HMRC refuses my application?
HMRC will write to you explaining the reason for refusal. Common reasons are a compliance failure in the previous 12 months or insufficient turnover. You can appeal the decision if you believe it is incorrect, or reapply after addressing the issue.
My contractor is still deducting tax even though I have gross payment status. What should I do?
Ask the contractor to re-verify your status with HMRC. If they have not updated their records, they may still have you listed as a standard rate subcontractor. Once they re-verify, they should see your gross status and stop deducting.
How often does HMRC review gross payment status?
HMRC reviews it annually. They may also carry out ad hoc reviews if they have concerns about your compliance. Staying on top of filing deadlines and paying on time is the best way to keep your status secure.
Speak to a CIS Tax Specialist
Gross payment status can make a genuine difference to your business finances, but getting there requires a clean compliance record and correct application. If you are not sure whether you qualify or want help preparing your application, we can review your position and advise you honestly.
Our principal tax adviser is ACCA qualified, ATT qualified, and an HMRC Registered Tax Agent with over 25 years of experience. We help CIS subcontractors across Gravesend, Dartford, Medway, Maidstone, Tonbridge, and Sevenoaks manage their tax affairs efficiently. Contact us today for straightforward advice with no obligation.
Also see: CIS Tax Refund in Gravesend | CIS Tax Refund in Maidstone | CIS Tax Refund in Tonbridge
