If you're a subcontractor registered for CIS, you're used to seeing 20% disappear from every payment before it reaches your bank account. Gross payment status changes that to 0%, and it's one of the few genuinely underused wins available to established subcontractors. Here's what it actually takes to qualify, and why it's worth the paperwork.
What is gross payment status?
Gross payment status means a contractor pays you in full, with no CIS deduction taken off at source. Instead of HMRC collecting tax upfront through deductions on every invoice, you take responsibility for paying your own Income Tax, Corporation Tax and National Insurance through your normal Self Assessment or Corporation Tax return. The tax itself doesn't disappear, you still owe it, but you control when it leaves your bank account rather than HMRC holding it for you a payment at a time.
The three tests you need to pass
HMRC won't grant gross payment status on request. You need to pass three separate tests, and all three have to hold up, not just the ones that are easy for your business.
- The business test. You need to show you're actually carrying out construction work in the UK, and that the business runs through a genuine business bank account.
- The turnover test. Your net construction turnover, that's your income from construction work excluding VAT and the cost of materials, needs to be at least £30,000 in the 12 months before you apply. For a partnership or a company with more than one partner or director, that £30,000 threshold generally applies per partner or director, not once across the whole business.
- The compliance test. Your tax affairs need to be in order: CIS returns, PAYE, Corporation Tax or Self Assessment, and, since a 2024 reform, VAT too. HMRC allows some tolerance, up to three late payments of £100 or more (each up to 14 days late) per tax type, and anything under £100 doesn't count against you at all. A fourth late payment, or one that's more than 14 days overdue, is usually enough to fail the test.
You can read HMRC's own breakdown of the tests on its how to get gross payment status page.
How to apply for gross payment status
You apply through the same Government Gateway CIS registration service you'd use for standard CIS registration, either as part of registering for the first time or afterward once your turnover history supports it. You'll need your UTR, details of your business bank account, and evidence of your construction turnover for the past 12 months, invoices and bank statements are usually enough. If your compliance record has any late payments or returns, it's worth checking those against HMRC's tolerance before you apply rather than finding out from a refusal letter.
Why it's worth it
The tax bill doesn't change, but when you pay it does, and that timing difference is real money. Take a subcontractor invoicing £50,000 of labour over a year. Deducted at 20%, that's £10,000 taken off in instalments throughout the year and sitting with HMRC until it's reconciled against your actual tax bill at Self Assessment. At gross payment status, that same £10,000 stays in your business the whole time, available to cover materials, fund a quiet month, or just sit as a buffer, right up until your tax is actually due.
There's a practical side too. Contractors dealing with a gross-status subcontractor don't need to apply a deduction or track it on their CIS300 return, which makes you marginally less admin for them to work with. It's a small thing, but on a large or recurring contract it's noticeable.
Keeping gross payment status once you have it
This is where most cancellations actually happen, not at the application stage but afterward, when a subcontractor lets their compliance slip once the pressure of the application is off. HMRC's review checks the same compliance test again: CIS, PAYE, Corporation Tax or Self Assessment, and VAT. If HMRC cancels your status, you're back to 20% deductions immediately, and you generally can't reapply for a year, longer if the cancellation was fraud-related. Given the cash flow benefit you'd be giving up, it's worth treating your filing and payment deadlines as non-negotiable once you've got gross payment status, not just something to catch up on eventually.
Rehan Razzaq, FCCA
ACCA Chartered Certified and a Xero Certified Advisor, helping UK construction businesses with accounts, tax and financial planning.
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