Guide
Apply for CIS gross payment status
How subcontractors can apply for gross payment status to receive the full value of construction payments without deductions. Covers eligibility requirements, the three tests, application process, and maintaining GPS once granted.
Apply for Gross Payment Status (GPS) to receive full construction payments without 20% deductions. You must pass three tests: business, turnover (£30,000 minimum), and tax compliance. HMRC checks your status yearly.
- Apply for GPS if you want full payments without deductions
- Pass the business test (UK construction work and bank account)
- Meet the turnover test (£30,000 net construction income)
- Pass the compliance test (all tax returns and payments on time)
- GPS improves cash flow but does not reduce your tax bill
- HMRC reviews your GPS status every year
- Keep all tax records up to date to maintain GPS
- Deductions are only on labour (exclude VAT and materials)
- GPS holders get 100%, registered 80%, unregistered 70% of payments
- Check if you qualify before applying
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.
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.
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.
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 GPS application
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:
Limited company GPS application
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:
Partnership GPS application
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.