CIS Gross Payment Status UK 2026/27: How to Apply

How CIS Deductions Work in 2026/27

The Construction Industry Scheme (CIS) requires contractors to deduct money from payments made to subcontractors and pass it to HMRC. These deductions count as advance payments toward the subcontractor's Income Tax and National Insurance bill for the year.

The deduction rate depends on your registration status:

• Registered subcontractor: 20% deducted on labour element of invoices (materials are excluded)
• Unregistered subcontractor: 30% deducted -- a significantly higher rate designed to encourage registration
• Gross payment status: 0% deducted -- you receive the full invoice amount

For a subcontractor earning GBP 60,000 in labour income per year, the difference between 20% and gross payment status is GBP 12,000 in cash flow. The money is not lost -- it offsets the eventual tax bill -- but having it deducted monthly means you cannot use it for working capital, equipment purchases, or investment. For many construction businesses, gross payment status is a significant competitive and operational advantage.

Use the CalcHub CIS Tax Calculator to estimate how much is being deducted from your payments under the current scheme and how your overall tax liability will look at year end.

Who Is Covered by CIS?

CIS applies to work in the UK construction industry. Contractors -- businesses that pay other businesses or individuals for construction work -- must register as contractors and operate the scheme. Subcontractors are the businesses or individuals doing the work.

The scheme covers most construction operations including:

• Building, demolition, and alteration of permanent or temporary structures
• Installation of systems including heating, lighting, power, water, and ventilation
• Cleaning the inside of a building as part of construction
• Site preparation, roadworks, and landscaping as part of a construction project

It does not cover purely professional services such as architecture, surveying, or legal work, nor does it cover manufacturing of materials off-site. Labour-only supply agencies operating under PAYE are also excluded.

Both contractors and subcontractors must be registered with HMRC to use CIS. Contractors verify subcontractor status through the HMRC online service before making a payment -- this tells them whether to deduct 0%, 20%, or 30%.

What Is Gross Payment Status?

Gross payment status is a formal approval from HMRC allowing a subcontractor to receive payments in full, without any CIS deduction. The contractor verifies the subcontractor through the HMRC online portal and the system returns a "gross" result, confirming no deduction should be made.

This is distinct from simply being unregistered -- gross payment status is a positive approval that requires meeting specific tests. It is renewed continuously through annual compliance checks rather than requiring a fresh application each year, but it can be withdrawn at any time if your tax compliance record deteriorates.

Gross payment status is available to sole traders, partnerships, and limited companies that carry out construction work as subcontractors.

The Three Tests for Gross Payment Status

HMRC applies three tests when assessing a gross payment status application. All three must be passed.

1. The Business Test

You must carry on a business in the UK that includes construction operations, and payments for those operations must be made through a UK bank account. HMRC checks that you are genuinely operating a business rather than working as a disguised employee. Having a business bank account, invoicing contractors, and holding appropriate public liability insurance all support this test.

2. The Turnover Test

Your net construction turnover -- labour income only, excluding VAT and materials -- must exceed GBP 30,000 in the 12 months before your application. For partnerships and companies, HMRC applies the GBP 30,000 threshold per partner or director (so a two-director company needs GBP 60,000 combined net turnover). Sole traders need only show GBP 30,000 individually.

New businesses are assessed on an annualised projection. If you have been trading for 8 months and your net construction income is GBP 22,000, HMRC projects this to GBP 33,000 on an annual basis, which passes the test. However, projections are scrutinised carefully and HMRC may ask for invoices or bank statements to verify the figures.

3. The Compliance Test

This is often the most challenging test for applicants. HMRC reviews your tax record for the 12 months before the application date and checks for:

• Late Self Assessment tax returns
• Late Corporation Tax returns (if applicable)
• Late PAYE or CIS returns
• Underpayment or late payment of tax, NI, or VAT
• Any serious tax fraud or avoidance

Minor lapses -- a single return filed a few days late with a reasonable excuse -- are sometimes overlooked. Repeated lateness or substantial underpayments will result in refusal. Before applying, check your tax account on HMRC online and resolve any outstanding returns or liabilities.

How to Apply for CIS Gross Payment Status

Applications are made through the HMRC CIS online service, accessed via the Government Gateway. You will need:

• Your Unique Taxpayer Reference (UTR)
• Your National Insurance number (sole traders) or Company Registration Number (companies)
• Details of your construction turnover for the past 12 months
• Your business bank account details

You can also apply by calling the CIS helpline on 0300 200 3210. HMRC aims to process applications within 40 working days. If approved, contractors will be able to verify you as "gross" from the date of approval.

If you are refused, HMRC will explain the reason. You can appeal to the First-tier Tax Tribunal if you believe the decision is wrong. Common grounds for appeal include HMRC miscalculating turnover or incorrectly counting a compliant return as late.

CIS300 Monthly Returns and Keeping Your Status

Once you hold gross payment status -- or operate as a contractor -- the monthly CIS300 return is a critical compliance obligation. Contractors must submit a CIS300 return for each month by the 19th of the following month, showing:

• The name and UTR of each subcontractor paid
• The gross amount paid
• The deduction made (or confirmation of gross payment)
• Whether materials costs were excluded

For example, a contractor paying subcontractors in June 2026 must submit the CIS300 return by 19 July 2026. Late returns attract fixed penalties starting at GBP 100, with increasing penalties for longer delays. Persistent late filing is one of the most common reasons HMRC cancels gross payment status at an annual review.

If you are a gross payment status holder who also acts as a contractor, you must still file CIS300 returns for any subcontractors you pay. Being a gross payment holder as a subcontractor does not exempt you from contractor obligations.

What Happens at the End of the Tax Year

As a subcontractor, whether gross or deducted, you must file a Self Assessment return by 31 January following the end of the tax year. If CIS deductions have been made throughout the year, HMRC credits these against your final Income Tax and NI bill. In many cases, subcontractors receive a repayment because more was deducted during the year than the final liability requires.

For example: a sole trader subcontractor with net construction income of GBP 45,000 in 2026/27, GBP 5,000 of allowable expenses, and no other income would have taxable profit of GBP 40,000. After the GBP 12,570 Personal Allowance, they pay Income Tax on GBP 27,430 at 20% = GBP 5,486, plus Employee NI at 8% on GBP 27,700 (earnings between GBP 12,570 and GBP 40,270) = GBP 2,216. Total liability roughly GBP 7,702. If the contractor deducted 20% on GBP 45,000 labour that is GBP 9,000 -- meaning a repayment of around GBP 1,298.

Gross payment status holders receive no in-year deductions but must budget carefully for the January 31 payment on account system. Use the CalcHub Self-Employed Tax Calculator to plan your payments on account and avoid a large unexpected bill.

Annual Review and Cancellation

HMRC reviews all gross payment status holders automatically each year. The review assesses the same three tests -- business, turnover, and compliance -- over the previous 12 months. If your turnover has fallen below GBP 30,000 or you have missed filing deadlines, HMRC will write to you proposing cancellation.

You have 30 days to respond and provide evidence or a reasonable excuse. If cancellation proceeds, contractors will be told to deduct at 20% from the date of cancellation. You can reapply once your compliance record is clean, but you must pass a full 12-month review period before a new approval is granted.

To protect your status: file all returns on time, pay all liabilities by the due date, and maintain your construction turnover above GBP 30,000 per year. Keep records of all CIS vouchers (the remittance advices sent by contractors) as these are needed to claim deductions on your Self Assessment return.