Gross CIS payment status: how to stop tax deductions from your invoices

If you work in the construction industry as a subcontractor and you are registered under the Construction Industry Scheme (CIS), HMRC will normally deduct tax from your payments before you receive them. For most subcontractors, this deduction is 20%. For those who are not registered under CIS at all, the deduction is 30%.

These deductions are not the end of the story — you reclaim them through your Self Assessment or corporation tax return, and any overpayment is refunded. But having 20% held back from every invoice can create a real cash flow problem, particularly if your tax bill at the end of the year is much lower than the amount that has been deducted. You are effectively giving HMRC an interest-free loan.

Gross payment status is the solution. It allows HMRC-approved subcontractors to receive their full invoice amount with no deductions. This article explains what it is, how to qualify, how to apply, and what happens if you lose it.

What is gross payment status?

Gross payment status (GPS) is an authorisation from HMRC that allows a CIS subcontractor to be paid the gross amount — i.e., the full invoice value — without the contractor making any tax deduction. You still pay tax on your profits through Self Assessment or corporation tax, but you pay it at the end of the year rather than in advance through CIS deductions.

For a busy subcontractor or small contractor turning over £300,000 a year, the difference between net and gross payment status could mean having £60,000 sitting in your bank account (or HMRC's) throughout the year. That working capital matters — especially when you have materials to buy and subbies of your own to pay.

Who can apply for gross CIS payment status?

Gross payment status is available to sole traders, partnerships, and companies that are registered under CIS as subcontractors. HMRC applies three tests before granting it:

1. The business test

You must carry out construction operations in the UK or provide labour for construction operations. This includes most trade work — building, plumbing, electrical, roofing, decoration, and so on. The definition of construction operations in the CIS rules is broad.

2. The turnover test

Your business must have a net turnover from construction operations that meets a minimum threshold. The thresholds are:

• Sole traders and individuals in a partnership: £30,000 a year from construction operations
• Partnerships: £30,000 per partner, or £200,000 for the partnership as a whole, whichever is less
• Companies: £30,000 per director who controls the company, or £200,000 for the company as a whole, whichever is less

These figures are for net turnover — so turnover from your own CIS work, not including subcontractors you pay on to others.

3. The compliance test

This is where applications most often fail. HMRC will check your tax compliance record for the 12 months before the application. To pass, you must have filed all tax returns on time (Self Assessment, VAT, PAYE, CIS), paid all taxes on time, and not have any outstanding tax debts.

HMRC takes a strict view. Even one late Self Assessment return in the past 12 months can result in a refusal. If you have had minor issues with late filing, consider waiting until your compliance record is clean before applying.

How to apply for gross CIS payment status

There are two main ways to apply:

Online through the HMRC CIS service

If you are registered for CIS and have a Government Gateway account, you can apply for gross payment status through your CIS online account. Go to HMRC's CIS guidance and follow the link to manage your CIS subcontractor registration. The online application is usually the quickest route.

By telephone

Call HMRC's CIS helpline on 0300 200 3210. They can take an application over the phone and may be able to give an initial indication of whether you are likely to qualify. Have your UTR, NI number (if sole trader), turnover figures, and compliance details to hand.

HMRC will typically take up to 28 days to process an application. They will check your compliance record, verify your turnover, and may request supporting documentation.

What happens after you get gross payment status?

Once approved, HMRC adds you to the CIS register as a gross payment subcontractor. When a contractor looks you up on the CIS Verification Service, they will see that you have gross status and should pay you in full without deductions.

You are responsible for telling all contractors you work for that you have gross status, and keeping evidence of this. Most contractors will verify you online before making a payment anyway, which will confirm your status automatically.

You still have all your normal tax obligations — filing Self Assessment on time, paying tax by the payment deadlines, and keeping records. Gross payment status does not exempt you from anything; it simply changes when you pay your tax (at the end of the year rather than throughout via deductions).

How to use gross payment status to improve cash flow

The main practical benefit is working capital. When you are paid gross, you keep the full invoice amount until your tax bill is due. That gives you more cash in the business day-to-day.

The flip side is that you need to manage your tax liabilities yourself. It is easy to spend money that you are holding on behalf of HMRC. A sensible approach is to set aside a proportion of each payment as a tax reserve — typically 20 to 25% of profits — in a separate account. That way, when your Self Assessment bill arrives in January, the money is there.

Use the CIS deduction calculator to estimate what your deductions would have been and cross-reference with your expected tax bill. And keep an eye on payment deadlines using a day rate calculator to make sure your cash flow projections are realistic.

HMRC reviews and how gross status can be withdrawn

HMRC can and does review gross payment status. Reviews can be triggered by:

• A late tax return or payment
• A significant change in your business (change of structure, new directors)
• An investigation or compliance check
• Annual review (HMRC periodically checks all GPS holders)

If HMRC cancels your gross status, they give you 90 days' notice before it takes effect (except in cases of fraud or serious non-compliance, where they can withdraw it immediately). Once cancelled, contractors must revert to making deductions from your payments.

You can reapply after a period of good compliance — typically at least 12 months without issues.

CIS gross payment status and VAT

CIS deductions are calculated on the labour element of your invoices, excluding VAT and materials. If you are VAT-registered, the contractor deducts CIS from the net labour figure, not the gross including VAT. With gross payment status, you receive the full invoice amount — labour, materials, and VAT — without any CIS deduction.

This can significantly improve your cash position if you are VAT-registered, because you no longer have to wait for both a CIS repayment and a VAT reclaim to come through at different times of year.

For a full overview of VAT on construction work, including the domestic reverse charge that applies to most B2B construction services, use the VAT calculator.

Frequently asked questions

How long does it take for HMRC to approve gross CIS payment status?

HMRC typically processes gross payment status applications within 28 days. If your compliance record is straightforward and your turnover meets the threshold, it is often quicker. Complex cases or applications where HMRC needs additional information may take longer.

Can I apply for gross status if I have a CIS penalty?

Having a CIS penalty on your record may affect your compliance test. HMRC considers your full compliance history for the 12 months before application. A recent penalty, particularly for late filing or payment, is likely to result in refusal. Wait until 12 clean months have passed before applying.

What happens to money already deducted before I got gross status?

CIS deductions made before your gross status is granted are offset against your tax bill through your Self Assessment return. If more has been deducted than your tax bill, HMRC refunds the difference — usually within 4 to 6 weeks of filing your return. If you need a faster refund, you can request an in-year CIS repayment using form CIS40.

Do I need to tell contractors that I have gross status?

Yes, though in practice contractors will usually verify your status using the HMRC CIS Verification Service before making payments. It is good practice to include your UTR on your invoices and confirm your gross status in writing when starting work with a new contractor.

Can a limited company have gross CIS payment status?

Yes. Companies can apply for gross payment status, but the compliance test applies to the company and all its directors. Every director must have a clean compliance record for the 12 months before application — if even one director has a late filing or payment, the application will likely be refused.