Apply for CIS gross payment status

If you are an established subcontractor under the Construction Industry Scheme (CIS), you may be eligible for Gross Payment Status (GPS). This allows you to receive the full value of your construction payments without the standard 20% deduction.

GPS significantly improves your cash flow, but HMRC only grants it to businesses that meet strict eligibility criteria and maintain excellent tax compliance. You must pass three tests: the business test, the turnover test, and the compliance test.

What is gross payment status?

Gross payment status changes how you are paid for construction work:

Without GPS: Contractors deduct 20% from your payments (or 30% if unregistered) and pay it to HMRC on your behalf
With GPS: Contractors pay you 100% of the contract value with no deductions. You are responsible for paying all your tax through Self Assessment or Corporation Tax

The deductions you would otherwise receive are advance payments of tax, so GPS does not reduce your tax bill. Instead, it improves your cash flow by letting you keep the money longer.

The financial benefit

Understanding the difference between payment rates shows why GPS matters for established subcontractors.

CIS deduction rates 2025/26

Construction Industry Scheme deduction rates applied to subcontractor payments. Contractors must deduct tax at source based on the subcontractor's registration status. Rates are set by HMRC and apply UK-wide.

Registered subcontractor rate: 20%
Unregistered subcontractor rate: 30%
Gross payment status rate: 0% (no deductions)
Effective from: Current tax year 2025/26
Deduction basis: Labour element only (excluding VAT and materials)

When to apply each rate:

20% rate - Subcontractor is registered with HMRC for CIS but does not have gross payment status. This is the standard rate for most registered subcontractors.
30% rate - Subcontractor is not registered with HMRC, or their details cannot be verified. Always verify subcontractors before first payment.
0% rate (gross payment) - Subcontractor has been granted gross payment status by HMRC. They receive full payment and account for tax themselves via Self Assessment or Corporation Tax.

Important: Deductions are calculated on the labour element only. Exclude VAT and any materials the subcontractor has directly paid for.

What is the Construction Industry Scheme

CIS contractor - make deductions and pay subcontractors

Example cash flow impact

On a construction contract worth 10,000 pounds (labour element, excluding VAT and materials):

GPS holder receives: 10,000 pounds (full payment)
Registered subcontractor: 8,000 pounds (2,000 pounds deducted)
Unregistered subcontractor: 7,000 pounds (3,000 pounds deducted)

Over a year of contracts totalling 100,000 pounds, the difference between GPS and net payment status is 20,000 pounds in improved cash flow. You still owe the same tax, but you have the money in your bank account for longer.

Who can apply for GPS

GPS is designed for established construction businesses with a proven track record. To qualify, you must pass all three eligibility tests when you apply and continue meeting them to keep your status.

CIS Gross Payment Status turnover thresholds

Minimum turnover requirements and three eligibility tests for CIS Gross Payment Status, allowing subcontractors to receive payments without deductions.

Gross Payment Status (GPS) allows CIS-registered subcontractors to receive the full payment for construction work without 20% deductions. To qualify, you must pass all three eligibility tests: the business test, the turnover test, and the compliance test.

Sole trader threshold: At least £30,000 net construction turnover in qualifying 12-month period
Partnership threshold: At least £30,000 per partner in net construction turnover
Company threshold (close company): At least £30,000 per relevant person (director or shareholder with control)
Company threshold (widely held): At least £30,000 total net construction turnover
Turnover calculation: Net turnover excluding VAT and cost of materials
Qualifying period: 12 months ending with application date

The three eligibility tests

1. Business test

You carry on a business in the UK that includes construction operations
You are run mainly through a bank account

2. Turnover test

Your net construction turnover meets the minimum threshold for your business type
Turnover is calculated excluding VAT and the cost of materials you paid for directly
Based on the 12 months before your application

3. Compliance test

Filed all Self Assessment tax returns on time
Filed all CIS monthly returns on time (if you are also a contractor)
Filed all VAT returns on time (from April 2024)
Paid all PAYE, National Insurance, CIS deductions, and VAT on time
Complied with Companies Act requirements (if a company)
Supplied any tax information requested by HMRC

Minor compliance failures allowed

HMRC allows the following minor failures without affecting your GPS eligibility:

Up to 3 late CIS returns (no more than 28 days late each)
Up to 3 late VAT returns (no more than 28 days late each)
Up to 3 late payments of £100 or more (no more than 14 days late each, per tax type)
Any late payment under £100
Self Assessment return up to 28 days late

Maintaining GPS

Once granted, HMRC reviews your Gross Payment Status annually. They can cancel your GPS if you no longer meet the compliance test or other requirements. Continue filing all returns and making all tax payments on time to keep your status.

Apply for CIS gross payment status

Key points about the tests

The turnover test

The turnover thresholds are based on net construction turnover - this means:

Only income from construction operations counts (not other business activities)
Exclude VAT from your calculations
Exclude the cost of materials you paid for directly
The qualifying period is the 12 months ending with your application date

If you do not meet the turnover threshold, you cannot get GPS regardless of your compliance record. You may need to grow your business before applying.

The compliance test

This is the most common reason for GPS refusal. HMRC checks your compliance record for the 12 months before your application. From 6 April 2024, VAT compliance is included in this test.

You must have filed all returns and made all payments on time for:

Self Assessment
CIS monthly returns (if you are also a contractor)
VAT
PAYE and National Insurance
Companies Act filings (if a limited company)

HMRC allows some minor failures, such as up to 3 late returns that were no more than 28 days late. More serious or repeated failures will result in refusal.

How to apply

Follow this process to apply for gross payment status.

Apply for CIS Gross Payment Status

Step-by-step procedure for applying for Gross Payment Status under the Construction Industry Scheme. Covers eligibility requirements (the three tests), evidence needed, application methods, HMRC decision process, and how to maintain GPS once granted. Includes guidance on what to do if your application is refused.

Gross Payment Status (GPS) allows CIS-registered subcontractors to receive the full value of their construction payments without the standard 20% deduction. This significantly improves cash flow, but HMRC only grants GPS to businesses that meet strict eligibility criteria and maintain ongoing compliance.

You must pass all three eligibility tests to qualify: the business test, the turnover test, and the compliance test.

Step 1: Check you pass the business test – The business test confirms you are a genuine construction business operating in the UK with proper financial controls in place.
Step 2: Check you pass the turnover test – The turnover test ensures your construction business has sufficient trading history. Thresholds vary by business type. Turnover is calculated as net construction turnover (excluding VAT and the cost of materials you paid for directly) in the 12 months before your application.
Step 3: Check you pass the compliance test – The compliance test is the most common reason for GPS refusal. HMRC checks your tax compliance record for the 12 months before application. From 6 April 2024, VAT compliance is also included.
Step 4: Understand permitted minor failures – HMRC allows some minor compliance failures without automatically refusing your GPS application. These tolerances give you room for genuine administrative errors.
Step 5: Gather your evidence – Before applying, prepare documentation to support your application. HMRC may request evidence to verify turnover and business tests.
Step 6: Apply online or by post – Submit your application to HMRC. The online service is faster and gives immediate confirmation of submission. This also registers you for CIS if you are not already registered.
Step 7: HMRC decision process – After submission, HMRC will review your application against the three tests. The compliance test is automated; business and turnover tests may require manual review.
Step 8: Maintain your Gross Payment Status – GPS is not permanent - HMRC reviews your status annually. You must maintain ongoing compliance to keep receiving payments without deductions.

What to do if your application is refused

If HMRC refuses your GPS application, they will tell you which test you failed. You have options depending on the reason:

Failed compliance test: Address the outstanding compliance issues (file late returns, pay tax debts, set up Time to Pay arrangement). You can reapply after 12 months of clean compliance.
Failed turnover test: Continue building your construction business until you meet the threshold. Keep records to prove turnover when you reapply.
Failed business test: Ensure you have a proper bank account and UK business presence. Sole traders may need to demonstrate a fixed place of business.
Appeal: If you believe HMRC made an error, you can request a review within 30 days or appeal to the tax tribunal.

You can reapply for GPS at any time, but repeated applications without addressing the underlying issues will be refused.

GPS cancellation and reinstatement

If HMRC cancels your GPS at annual review:

You will receive written notice with the reason for cancellation
You have 30 days to request a review of the decision
Once cancelled, contractors will see your status as "net payment" when they verify you
You can reapply after addressing the compliance failures, but must demonstrate 12 months of clean compliance

Business test: UK business with bank account carrying on construction operations
Sole trader turnover threshold: £30,000 net construction turnover in 12 months
Partnership turnover threshold: £30,000 per partner in 12 months
Company turnover threshold: £30,000 per relevant person (close company) or £30,000 total (widely held)
Compliance test period: 12 months before application
VAT compliance added: 6 April 2024 (SI 2024/305)
Minor failures permitted: Up to 3 late returns (28 days max) or 3 late payments (14 days max)
Annual review: HMRC reviews GPS annually and can cancel for non-compliance
Appeal deadline: 30 days from decision to request review

Apply for CIS gross payment status

CIS registration service (includes GPS application)

Maintaining your GPS

GPS is not granted permanently. HMRC reviews your status annually, typically in the spring. To keep receiving payments without deductions, you must:

Continue filing on time: All Self Assessment, CIS, VAT, and PAYE returns must be submitted by their deadlines
Pay all taxes on time: Late payments can trigger GPS cancellation, even if amounts are small
Maintain your bank account: Your business must continue operating through a bank account
Notify HMRC of changes: Tell HMRC if your business structure, address, or other details change
Manage cash flow carefully: Set aside money for your tax bills since no deductions are being made

What happens if GPS is cancelled

If you fail the compliance test at annual review, HMRC will cancel your gross payment status:

You will receive written notice explaining the reason for cancellation
You have 30 days to request a review of the decision
Once cancelled, you revert to 20% net payment status (or 30% if your CIS registration also lapses)
Contractors who verify you will immediately see your changed status

Re-applying after cancellation

If your GPS is cancelled or your application is refused:

Address the issues: Resolve the compliance failures that caused the problem (file late returns, pay tax debts, set up a Time to Pay arrangement)
Wait for clean compliance: You will typically need 12 months of clean compliance before reapplying successfully
Gather evidence: Keep records showing you now meet all three tests
Reapply: You can submit a new application at any time, but it will be refused if you have not addressed the underlying issues

If you believe HMRC made an error in their decision, you can request a review within 30 days or appeal to the tax tribunal.

Is GPS right for your business?

GPS benefits established subcontractors who:

Have consistent work and turnover above the thresholds
Maintain excellent tax compliance records
Need cash flow for materials, wages, and equipment
Have good financial management and set aside money for tax

GPS may not be suitable if:

Your compliance record has recent issues
You struggle to manage cash flow and set aside money for tax
Your turnover fluctuates below the thresholds
You have difficulty filing returns on time

Consider whether you can reliably meet the compliance requirements before applying. Having GPS cancelled can be disruptive to your business relationships with contractors.

SOLE TRADER Requirement

As a sole trader, you must demonstrate:

At least 30,000 pounds net construction turnover in the last 12 months
Filed Self Assessment returns on time
Paid all tax, NI, and VAT on time
A UK bank account in your name or trading name

Apply online using Government Gateway or by post using the standard CIS registration process (selecting GPS).

Comparison to other structures:

Sole traders need 30,000 pounds personal turnover. Partnerships need 30,000 pounds per partner.

LIMITED COMPANY Requirement

Limited companies controlled by 5 or fewer people must demonstrate:

At least 30,000 pounds per relevant person (directors and shareholders with control)
Filed Corporation Tax and Companies House returns on time
Paid all Corporation Tax, PAYE, NI, CIS deductions, and VAT on time
A company bank account

Widely held companies (more than 5 controllers) only need 30,000 pounds total turnover.

Important: Remember that limited companies claim back CIS deductions through payroll (EPS submissions), not Corporation Tax returns. If you have GPS cancelled, you will need to adjust your payroll processes.

Comparison to other structures:

Close companies need 30,000 pounds per director/controlling shareholder. Widely held companies need 30,000 pounds total.

PARTNERSHIP Requirement

Partnerships must demonstrate:

At least 30,000 pounds per partner in net construction turnover
For example: 3 partners need at least 90,000 pounds combined turnover
Filed partnership Self Assessment return and all partner returns on time
All partners have paid their tax on time

Apply by post using form CIS304. The registering partner must provide their personal details for verification.

Comparison to other structures:

Partnership turnover threshold scales with the number of partners - 30,000 pounds multiplied by the number of partners.

Apply for CIS gross payment status online

Business Context Testing

Content Graph

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Apply for CIS gross payment status

What is gross payment status?

The financial benefit

Example cash flow impact

Who can apply for GPS

Key points about the tests

The turnover test

The compliance test

How to apply

Maintaining your GPS

What happens if GPS is cancelled

Re-applying after cancellation

Is GPS right for your business?

Sole trader GPS application

Comparison to other structures:

Limited company GPS application

Comparison to other structures:

Partnership GPS application

Comparison to other structures:

Compliance Assistant

🧪 Business Context Testing

◉ Content Graph

What is gross payment status?

The financial benefit

Example cash flow impact

Who can apply for GPS

Key points about the tests

The turnover test

The compliance test

How to apply

Maintaining your GPS

What happens if GPS is cancelled

Re-applying after cancellation

Is GPS right for your business?

Sole trader GPS application

Comparison to other structures:

Limited company GPS application

Comparison to other structures:

Partnership GPS application

Comparison to other structures:

Related guides in Company Registration

Business Context Testing

Content Graph