CIS Gross Payment Status 2026: How to Apply and Qualify

CIS Overview

The Construction Industry Scheme (CIS) requires contractors to make deductions from payments to subcontractors for labour in the construction industry, and to pay those deductions to HMRC on behalf of the subcontractor. The deduction rate depends on the subcontractor's status: 20% for registered subcontractors; 30% for unregistered subcontractors (those who have not registered for CIS at all).

The deductions are not additional tax — they are advance payments of the subcontractor's income tax and National Insurance liability. At the end of the tax year, the subcontractor offsets the deductions against their self-assessment tax bill. If deductions exceed the liability, HMRC repays the overpayment.

What Is Gross Payment Status?

Gross Payment Status (GPS) is a certification granted by HMRC to subcontractors who meet qualifying tests. A subcontractor holding GPS receives payments from contractors with no CIS deduction — the full gross payment is paid over. The subcontractor then accounts for all tax and National Insurance through self-assessment in the normal way.

GPS eliminates the cash flow disadvantage of CIS deductions being held by HMRC throughout the year. It is not automatic — subcontractors must actively apply and meet the qualifying conditions every year.

The Three Qualifying Tests

HMRC applies three tests when assessing a GPS application. The Business Test requires the applicant to demonstrate they are genuinely in business — they must operate through a dedicated business bank account and carry on a bona fide construction trade.

The Turnover Test requires annual net construction turnover (excluding VAT and materials) of at least £30,000. For partnerships, this is £30,000 per partner. For companies, it is £30,000 multiplied by the number of directors (so a two-director company needs £60,000 turnover).

The Compliance Test is the most exacting: all tax returns (SA, CT, PAYE, VAT) must have been filed on time and all tax paid on time for the preceding 12 months. HMRC checks every obligation — one missed deadline can fail the test.

How to Apply for GPS

Individuals and sole traders apply using form CIS302, available from HMRC. Partnerships use CIS304 and companies use CIS305. Applications can also be made online through the HMRC CIS online service (requires a Government Gateway account). You will need your UTR, business bank account details, trading name, and evidence of construction turnover (recent invoices or accounts).

HMRC targets a processing time of 40 working days, though this can be longer during busy periods. Contractors who work with you regularly can in some cases apply on your behalf, though this is less common. Approval is not guaranteed and HMRC may request additional information.

Maintaining GPS: The Compliance Test is Ongoing

GPS is not a one-time award. HMRC reviews it annually and can remove it at any time if a subcontractor fails the compliance test. HMRC's systems automatically flag late returns or late payments. Even a single missed filing or payment deadline in the previous 12 months can cause GPS to be withdrawn.

Subcontractors holding GPS must treat every HMRC deadline as critical: set up direct debits for all tax payments where possible, diarise filing deadlines well in advance, and confirm in good time that payments have been received by HMRC. Do not rely on the normal grace periods — HMRC applies the compliance test strictly.

Losing Gross Payment Status

When HMRC removes GPS, they notify the subcontractor by letter. There is a 14-day window to appeal if you believe the removal was in error — for example, if you can show a return was filed on time but HMRC records do not reflect this.

If GPS is removed and not successfully appealed, the subcontractor cannot reapply for 12 months. During that 12-month ban, all payments from contractors will have CIS deductions (20% for registered, 30% if registration also lapses). The cash flow impact of losing GPS on a business turning over £200,000 or more can be severe — tens of thousands of pounds withheld monthly.

Cashflow Benefit Analysis

Consider a sole trader subcontractor with £150,000 gross annual construction turnover. Without GPS, contractors deduct 20% = £30,000 throughout the year and pay it to HMRC. The subcontractor only receives this £30,000 back when their self-assessment tax return is processed — potentially 12 to 18 months after deductions began.

With GPS, that £30,000 stays in the business all year. It can fund materials, wages, or equipment, or simply earn interest. For a subcontractor who is profitable and has limited credit, GPS can be the difference between cash flow stability and financial strain. The benefit scales with turnover.

Comparison: Standard vs Gross vs Unregistered

There are three possible CIS statuses. Unregistered subcontractors suffer a 30% deduction — the harshest rate, designed to incentivise registration. Standard registered subcontractors suffer a 20% deduction — still a significant cash flow cost but significantly better than 30%. Gross Payment Status holders suffer a 0% deduction — no cash is withheld.

Every subcontractor in construction should at minimum be registered for CIS to benefit from the 20% rather than 30% rate. Those who meet the turnover and compliance thresholds should apply for GPS. The 10-percentage-point difference between standard (20%) and unregistered (30%) can represent tens of thousands of pounds per year on a significant turnover.