Last updated: November 2026. This is general guidance, not tax advice. Check HMRC's current rules or speak to an accountant before you apply.
What is gross payment status? It is a CIS registration that lets a subcontractor be paid in full by contractors, with no tax deducted at source. Without it, a registered subcontractor normally has 20% held back from the labour part of every invoice, and an unregistered one has 30% held back. With it, you get the whole payment and settle your own tax later through Self Assessment or your company's Corporation Tax.
That difference matters most for cash flow. Tax still gets paid. You just stop waiting months for a refund of money you never owed.
How CIS deductions work for subcontractors
The Construction Industry Scheme (CIS) covers most construction work done for a contractor in the UK. When a contractor pays you for construction work, they must verify you with HMRC first. HMRC tells them which rate to use:
- Gross (0%) if you hold gross payment status
- 20% if you are registered for CIS without gross status
- 30% if you are not registered
Deductions apply to labour, not to materials you bought for the job. The contractor sends the money to HMRC and gives you a payment and deduction statement. You then offset those deductions against your tax bill.
For a sole trader, any overpayment usually comes back after the Self Assessment return is filed. For a limited company, deductions can be set against the company's PAYE liabilities each month, which helps, but it still ties up money.
HMRC's overview is here: the Construction Industry Scheme on GOV.UK.
The three tests for gross payment status
HMRC checks three things. You need to pass all of them, and so do the people behind the business.
1. The business test
You must run a construction business in the UK, and it must be run mainly through a bank account. HMRC wants to see real trading: invoices, payments in and out, and records of the work.
2. The turnover test
This looks at your construction turnover over the last 12 months, excluding VAT and the cost of materials. HMRC's published thresholds at the time of writing are:
- Sole trader: at least £30,000
- Partnership: at least £30,000 for each partner, or at least £100,000 for the whole partnership
- Limited company: at least £30,000 for each director, or at least £100,000 for the whole company
- Close company (controlled by 5 or fewer people): at least £30,000 for each director and shareholder, or at least £100,000 for the whole company
Thresholds and the way they apply can change. Confirm the current figures on GOV.UK before you apply.
3. The compliance test
You, and any partners, directors or relevant shareholders, must have filed tax returns and paid tax on time over the past 12 months. That includes Self Assessment, PAYE, VAT and CIS returns if you are also a contractor. HMRC allows some limited lateness, but the rules are specific, so check them rather than assume.
This is the test most people fail. One late VAT return or a missed PAYE payment can be enough.
Do you need gross payment status?
Not every trade business benefits. Use this as a rough guide, then check your own numbers.
| Your situation | Is gross status worth pursuing? |
|---|---|
| Subcontractor working mostly for main contractors on CIS jobs | Usually yes. Deductions hit most of your income. |
| Labour-heavy trades (groundworks, bricklaying, plastering, dryliners) | Usually yes. Most of each invoice is labour. |
| Materials-heavy trades with small labour share | Less urgent. Deductions only apply to labour. |
| Limited company that can offset CIS against PAYE | Helpful, but the cash flow gain is smaller. |
| Mostly domestic work for homeowners | Often no. Homeowners are not CIS contractors, so no deduction applies. |
| Below the turnover threshold | Not yet. Build your record and apply when you qualify. |
| Patchy filing history | Not yet. Get 12 clean months first. |
| You only pay subcontractors, never receive CIS payments | No. You need contractor registration instead. |
If most of your income already arrives without deductions, gross status adds little. If 20% of your labour income disappears every month, it can change how you run the business.
How to apply
Applying is free with HMRC. The steps are straightforward. The preparation is what decides the outcome.
- Check you are registered for CIS. You need to be a registered subcontractor before, or as part of, your application.
- Pull your last 12 months of figures. Separate labour from materials and VAT. Have your payment and deduction statements to hand.
- Check every filing date. Go back through Self Assessment, VAT, PAYE and CIS returns for the period. Fix anything outstanding before you apply.
- Apply through HMRC. Sole traders and partners usually apply through their online HMRC account. Companies use their business tax account or contact the CIS helpline. Follow the current route shown on GOV.UK.
- Wait for the decision. HMRC writes to you. If you are refused, the letter explains why and how to appeal.
Once approved, contractors who verify you will be told to pay you gross. Tell your regular contractors you have changed status so they re-verify you if needed.
Keeping it and losing it
Gross payment status is not permanent. HMRC reviews it regularly, and runs a compliance check against your recent filing and payment history.
You can lose it if:
- You file returns late or pay tax late
- You give HMRC incorrect information
- Your business no longer meets the business or turnover tests
- HMRC finds you have failed to meet CIS obligations as a contractor
If HMRC removes it, you move back to 20% deductions. You normally have to wait before you can reapply, and the wait is long enough to hurt cash flow for most of a year.
The practical lesson is simple. Treat every tax deadline as if your gross status depends on it, because it does.
Habits that help you keep it
- Put every filing deadline in one shared calendar, not in someone's head
- Pay HMRC by direct transfer a few days before the due date
- Reconcile payment and deduction statements monthly, not at year end
- Keep labour and materials split on every invoice
- Review your rolling 12-month turnover every quarter
Where tidy job records help
HMRC's tests reward a business that knows its numbers. That is mostly a record-keeping problem.
Illustrative example: a small plastering firm subcontracts to three main contractors and also takes some private work. At year end, the owner struggles to show which invoices were CIS work, how much was labour and which payments arrived late. The application stalls while the accountant rebuilds the history.
Plan@Job is AI-powered project and operations management for construction and property businesses. In Plan@Job, the Operator is the contractor business that manages clients, project delivery, subcontractors and in-house operatives. As an Operator, you can split jobs into internal stages with scope, dates, status and costs, covering both subcontracted and in-house delivery. That gives you a clearer view of what each job involved and what it cost to deliver.
Maya Collins, the AI Finance Coordinator, prepares deposit requests and overdue payment actions for your approval. Nothing goes out without a person deciding. Plan@Job does not file CIS returns, calculate your tax position or apply for gross status on your behalf. Your accountant and HMRC handle those.
You can see how project plans work on the project management features page.
What still needs your decision
Software and accountants can prepare the ground. These calls remain yours:
- Whether gross status is worth it for your mix of work
- When your 12-month record is clean enough to apply
- Whether to appeal a refusal
- How to handle a late return before it becomes a pattern
If you want to compare notes with other UK contractors on CIS and cash flow, Contractor Club is a related community run alongside Plan@Job.
Next step
If you run a contractor business and want your jobs, stages and payment follow-ups in one place, start with the Plan@Job page for UK contractors. When it fits how you work, create an Operator account.
FAQ
Does gross payment status mean I pay less tax?
No. You pay the same tax. The difference is timing. Instead of contractors deducting it before paying you, you pay it yourself through Self Assessment or Corporation Tax. Set money aside so the bill does not catch you out.
Can a new business get gross payment status straight away?
Usually not. HMRC looks at the last 12 months of turnover and compliance, so a brand new business rarely has the history to pass. Most start on 20% deductions and apply once they have a clean year.
If I have gross status, do my own subcontractors get paid gross too?
Not automatically. Each subcontractor's rate depends on their own CIS status. When you pay them as a contractor, you verify each one with HMRC and apply the rate HMRC gives you.