CIS Gross Payment Status Explained: Who Qualifies and How to Apply

Invoice a contractor for £5,000 under standard CIS and £1,000 never reaches you. With gross payment status, the full £5,000 lands in your account. No 20% deduction if you're registered, no 30% if you're not.

And the rules have changed. Since 6 April 2026, HMRC has wider powers to cancel gross payment status immediately where a business knew, or should have known, that a payment was connected to tax fraud. Those cancellations can carry a five-year bar on reapplying.

What Is CIS Gross Payment Status?

Under standard CIS, a contractor deducts 20% from a registered subcontractor before paying, or 30% from one who isn't registered. That money goes to HMRC as an advance payment towards the subcontractor's tax bill. With gross payment status, the deduction is not made in the first place.

Gross payment status sits within the Construction Industry Scheme. You can apply for it when you first register as a subcontractor. There's no need to register at the standard rate and wait to upgrade later. If you're registered and your gross application is still being considered, contractors generally deduct at 20%, not the 30% unregistered rate.

The trade-off is responsibility. Sole traders and partners still need to settle Income Tax and National Insurance through Self Assessment. Limited companies deal with Corporation Tax through their Corporation Tax return.

Applying is optional. For businesses that qualify, the attraction is straightforward: keeping more cash in the business between invoicing and the eventual tax payment.

Who Can Apply for Gross Payment Status?

HMRC applies three tests before granting gross status: business, turnover and compliance. Sole traders, partnerships and limited companies can apply, but the turnover calculation depends on the business structure.

Basic Eligibility Criteria

The business test requires you to carry out construction operations in the UK, or supply labour for them, and conduct the business largely through a bank account. Running the business through a personal current account causes problems with this test.

The compliance test examines your filing and payment history over the previous 12 months. It covers obligations including CIS, PAYE, VAT, Income Tax and Corporation Tax.

HMRC can overlook a limited number of specific failures:

Those are tolerances, not a general grace period. A VAT return 30 days late, for example, does not become acceptable simply because the rest of the record is clean.

Documents and Evidence You Will Need

Have your Unique Taxpayer Reference (UTR) ready, along with your National Insurance number if you're a sole trader or partner. Limited companies will need their company details and Corporation Tax UTR.

You'll also need the relevant bank account information and figures supporting your construction turnover over the previous 12 months. Your invoices, contracts and accounting records should support the figure used on the application.

How to Calculate Your Turnover Correctly

The figure HMRC wants is qualifying construction turnover for the relevant 12-month period, excluding VAT and the cost of materials.

If you invoiced £48,000 and £14,000 related to materials, for example, your qualifying turnover would be £34,000. VAT charged on top does not enter the calculation.

The thresholds are set out in HMRC's guidance for CIS subcontractors. A sole trader needs £30,000. A partnership can qualify at £30,000 per partner or, where that test is not met, with total qualifying construction turnover of at least £100,000.

Companies require a little more care. The £30,000 test can depend on the relevant people involved rather than simply counting directors. For a close company controlled by five people or fewer, relevant persons are directors and beneficial shareholders, with £30,000 required for each of them. The £100,000 company threshold provides the alternative test where applicable.

This is an area where a neat headline threshold can hide an awkward calculation. At TurnerBerry, we'd rather check the structure and numbers before an application goes in than find out afterwards that the wrong turnover test was used.

Key Benefits of Gross Payment Status

The main benefit is cash flow. You receive the full invoice value instead of having 20% deducted from the labour element before payment. For a construction business funding wages, materials and other running costs, that makes a meaningful difference to working capital.

Administration is simpler too, because you no longer have CIS deductions coming off your incoming payments to reconcile and reclaim.

But the tax has not vanished. Without deductions being made throughout the year, you need to plan for the eventual Self Assessment or Corporation Tax bill yourself.

How to Apply for Gross Payment Status

HMRC looks at your construction turnover and compliance history over the relevant period. There is no application window, and you can request gross status when first registering for CIS if you meet the requirements.

The route depends on your business structure:

• Sole traders: CIS302.
• Partnerships: CIS304.
• Limited companies: CIS305.

You can use HMRC's online CIS services where available. If you're using a paper form, follow the current submission instructions on it. Don't rely on an old HMRC postal address.

Check your qualifying turnover carefully before submitting, especially the relevant-person rules for companies.

Approval Timescales

HMRC does not publish a fixed service standard for gross payment status decisions. Four to eight weeks is commonly quoted as a practical estimate, but it is not an HMRC deadline.

Applications with questions around turnover or compliance can take longer. If you've been waiting beyond the expected timeframe, you can contact HMRC about the application using your UTR.

You'll receive the decision from HMRC. If approved, contractors will see your gross status when they verify you through CIS.

Checking Your Status and Monthly Reporting

You can check your CIS information through your HMRC online account. Contractors should still verify your status with HMRC. They won't just take your word for it.

HMRC's verification tells the contractor whether to make a 20% deduction, a 30% deduction or pay you gross.

What Can Disqualify or Revoke Your Status?

Approval isn't permanent. HMRC continues to test whether businesses with gross payment status meet the requirements.

Public guidance describes the check as annual, but a first compliance test can take place around six months after gross status is granted.

Common Disqualifying Factors

Late or missing returns and payments can put gross status at risk. The compliance test includes CIS, PAYE and VAT obligations alongside relevant Income Tax and Corporation Tax requirements.

HMRC applies the specific tolerances set out earlier. It doesn't treat every small failure as automatic cancellation. But repeated or more serious failures can cause the business to fail the test.

Falling below the required turnover level or no longer carrying out qualifying UK construction operations can also affect eligibility.

Fraud is treated differently. HMRC already had powers to act in fraud cases, but since 6 April 2026 the rules have been widened so gross payment status can be cancelled immediately where the business knew, or should have known, that a payment was connected with tax fraud.

How to Appeal a Decision

For an ordinary compliance withdrawal, HMRC writes to the business before gross payment status ends. The withdrawal normally takes effect after 90 days.

Separately, you have 30 days from the date of the cancellation notice to request an internal review or appeal to the First-tier Tribunal. Those are two different clocks, so don't mistake the 90-day withdrawal period for the time available to challenge the decision.

What Happens if You Fail Your Review

For an ordinary cancellation, you generally cannot reapply for gross payment status for 12 months.

Fraud-linked cancellation is different. Since 6 April 2026, qualifying cancellations under the widened anti-fraud rules can take effect immediately and carry a five-year bar on reapplying.

Tax Implications and 2026 CIS Changes

Gross payment status does not reduce the tax you owe. It changes whether CIS tax is withheld before the money reaches you.

The VAT domestic reverse charge can also apply to qualifying construction services between VAT-registered businesses. There are exceptions, including certain supplies to end users and zero-rated construction work, so gross payment status does not determine whether the reverse charge applies.

The 2026 CIS changes are now in force. Contractor nil returns also returned from that date. For the latest rules before you apply or make changes, check the GOV.UK guidance for CIS subcontractors.

Gross payment status can be valuable, but keeping it depends on more than passing the test once. Keep the filings clean, know which deadlines matter and plan for the tax that is no longer being deducted before the money reaches you.

Because CIS is not being withheld from your incoming payments, setting money aside as you go can prevent a nasty tax-bill surprise later. That's the bit TurnerBerry cares about beyond the application itself: gross status can improve cash flow, but only if that extra cash is managed with the eventual tax liability in mind.