Gross payment status
Gross payment status means contractors pay you in full with no CIS deduction at all. You settle your own tax later instead. It transforms cash flow, and it is the single most valuable thing a growing subcontractor can apply for.
Updated 10 September 2026 · Tax year 2026/27
What it changes #
On £10,000 of labour in a month, a subcontractor at the standard rate has £2,000 held back. With gross payment status that £2,000 stays in the business until the tax is actually due. The total tax bill is identical. The timing is completely different.
That is the trade. Better cash flow now, a real tax bill to save for later. Estimate what you would owe at year end.
The three tests #
HMRC applies all three. Failing any one means the application is refused.
1. The business test
You must be carrying on a construction business in the UK, largely through a bank account. This is the easiest of the three and rarely the reason an application fails.
2. The turnover test
Turnover is measured as net construction turnover: excluding VAT and excluding the cost of materials. Labour, essentially. That catches people out, because a business turning over £45,000 with £20,000 of materials has only £25,000 of relevant turnover and fails.
| Business type | Threshold |
|---|---|
| Sole trader | £30,000 |
| Partnership | £30,000 per partner, or £100,000 for the whole partnership |
| Company | £30,000 per director, or £100,000 for the whole company |
The alternative £100,000 test is why a company with several directors can still qualify without hitting £30,000 for each one individually.
3. The compliance test
This is where most applications fail. HMRC looks at whether your tax affairs have been handled on time. That covers Self Assessment returns, Corporation Tax returns for a company, PAYE and National Insurance, CIS returns, and since April 2024 VAT compliance as well.
Late filings and late payments in the review period will sink an application, even a small one. If you are planning to apply, get twelve clean months behind you first.
Applying #
You apply to HMRC, and processing generally takes around 40 working days. If granted, contractors who verify you from that point are told to pay gross, at 0%.
It is not backdated. Deductions already made stay made and are reclaimed the normal way through your tax return.
How status is lost #
HMRC reviews gross payment status periodically, and it can be withdrawn. The usual cause is a slip in compliance: a late return, a missed payment, a CIS return not filed. Since April 2024 HMRC can also cancel status immediately where there is serious non-compliance or suspected fraud.
Losing it is worse than never having had it. Cash flow that was built around gross payments suddenly has 20% taken out of it, and there is a tax bill already accruing on the earlier gross income.
Should you apply #
Yes, if:
- Your labour-only turnover clears the threshold comfortably
- Your filings and payments have been on time for at least a year
- You can genuinely put the tax aside rather than spend it
Wait, if:
- You are close to the threshold once materials are stripped out
- There has been a late return or payment recently
- You would struggle to hold back money for a bill due months later
That last point is not a technicality. Gross payment status hands you money that is not yours to keep, and the businesses that get into trouble with it are the ones that treat it as profit.
Common questions #
What is CIS gross payment status?
It means contractors pay you in full with no CIS deduction at all. You settle the tax yourself later through Self Assessment or Corporation Tax.
What turnover do I need for gross payment status?
£30,000 of construction turnover excluding VAT and materials for a sole trader, £30,000 per partner or director, or £100,000 for the whole partnership or company under the alternative test.
Why do gross payment status applications get refused?
Most fail the compliance test. HMRC checks whether returns and payments have been on time, including Self Assessment, Corporation Tax, PAYE, CIS returns and, since April 2024, VAT.