CIS Gross Payment Status 2026: How Subcontractors Get Paid Without Deductions
Gross payment status under the Construction Industry Scheme lets subcontractors be paid in full, without the standard 20% or 30% CIS deduction. Here are the three tests and how to apply.
What CIS deductions normally look like
Under the Construction Industry Scheme (CIS), contractors are required to withhold tax from payments to subcontractors before paying them, unless the subcontractor holds gross payment status. The standard deduction rates are:
| Subcontractor status | Standard CIS deduction |
|---|---|
| Registered for CIS (standard rate) | 20% |
| Not registered for CIS | 30% |
| Gross payment status | 0% (no deduction) |
For a subcontractor without gross payment status, this means a meaningful chunk of every invoice is withheld by the contractor and paid to HMRC on the subcontractor's behalf — recovered later against the subcontractor's actual tax liability through Self Assessment or Corporation Tax, or refunded if it exceeds what's owed.
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For businesses with real overheads — materials, wages, subcontractors of their own, equipment — having 20% or 30% withheld from every payment can create serious cash flow strain, even though the money is eventually recovered. Gross payment status removes that friction.
The three tests HMRC applies
To be granted gross payment status, HMRC assesses applicants against three tests:
1. The business test
You must be able to demonstrate that you're running a genuine construction business in the UK, with a bank account, and administrative systems capable of properly reporting and paying tax.
2. The turnover test
Your business must meet a minimum net construction turnover threshold over the previous 12 months — excluding VAT and the cost of materials. Historically, this has been broadly around £30,000 for a sole trader, or per partner in a partnership / director in a company, with a higher combined figure applying to businesses with multiple partners or directors.
3. The compliance test
You must have a clean recent record of filing tax returns and paying tax on time — Self Assessment, PAYE, VAT, and Corporation Tax obligations as applicable. HMRC generally allows for a small number of minor slips within a set look-back period, but a poor compliance history is the most common reason applications are refused or existing status is later withdrawn.
How to apply
- Register for CIS first, if you haven't already, as either a sole trader, partnership, or limited company subcontractor.
- Apply for gross payment status through HMRC — this can typically be done as part of your CIS registration or as a subsequent application once trading.
- Provide evidence supporting the business and turnover tests, such as accounts, bank statements, and contracts.
- HMRC reviews your compliance history as part of the decision, checking your tax filing and payment record.
- If approved, HMRC will notify contractors (via the CIS verification system) that you should be paid gross, with no deduction.
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Open Take-Home Pay calculatorThe risk: status can be reviewed and cancelled
Gross payment status isn't a one-off award — HMRC periodically reviews holders, generally around an annual compliance check. If your filing or payment record slips during the year — a late VAT return, a missed Self Assessment payment deadline, or similar — HMRC can cancel your gross payment status, reverting you to standard 20% (or 30%) CIS deductions on future payments.
This is why maintaining strong bookkeeping and never missing a filing or payment deadline is essential once you hold the status — losing it can be a significant, sudden cash flow shock in the opposite direction, especially if you've become used to receiving full payment.
Weighing the decision
Gross payment status is generally worth pursuing for construction businesses with real overheads and cash flow needs, since the improvement in working capital can be substantial. However, it comes with an ongoing compliance burden: you need robust systems to make sure tax returns and payments are never late, since the consequence of losing the status can undo the cash flow benefit and create disruption with contractors who suddenly need to start withholding again.
The bottom line
CIS gross payment status is a cash flow tool, not a tax reduction. Passing the business, turnover, and compliance tests unlocks full payment from contractors, but the underlying tax liability is unchanged — it's simply settled later through your normal returns. Given that HMRC actively reviews and can withdraw the status, maintaining an impeccable compliance record is the price of keeping it.
Frequently asked questions
What is CIS gross payment status?
It's a status subcontractors can apply for under the Construction Industry Scheme, allowing contractors to pay them in full with no CIS deduction, rather than the standard 20% (registered) or 30% (unregistered) deduction taken off at source.
What are the three tests for gross payment status?
HMRC applies a business test (you're running a genuine construction business with the right systems), a turnover test (your net construction turnover meets a minimum threshold), and a compliance test (your tax returns and payments have been filed and paid on time).
What is the CIS turnover threshold for gross payment status?
Historically the turnover test has looked for net construction turnover (excluding VAT and the cost of materials) of broadly £30,000 for a sole trader or per partner/director, or a higher combined figure for multi-partner businesses — always check HMRC's current published thresholds before applying, as these can change.
Can gross payment status be taken away?
Yes. HMRC reviews compliance periodically, and if your tax filing or payment record falls behind — even for reasons like a temporarily missed VAT return — HMRC can cancel your gross payment status, reverting you to standard CIS deductions.
Why would a subcontractor want gross payment status?
It significantly improves cash flow, since you receive full payment for work done rather than having 20% or 30% withheld and only recovered later against your tax bill or as a refund.
Does gross payment status mean I pay less tax overall?
No. It changes when tax is collected, not how much is ultimately due. You still need to pay your actual Income Tax, Corporation Tax, and National Insurance liabilities through Self Assessment or Corporation Tax returns as normal.
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