Guide

Your GPS has been cancelled - what happens now

What to do after your CIS gross payment status is cancelled. Understand the difference between cancellation and revocation, manage the cash flow impact, and learn when you can reapply for GPS.

Construction & Property UK-wide

Receiving a notice that your Gross Payment Status (GPS) has been withdrawn is stressful. Suddenly, contractors will deduct 20% from every payment, putting immediate pressure on your cash flow.

This guide helps you understand what has happened, what you need to do immediately, and how to work towards getting GPS back.

First, check exactly what happened

GPS can be withdrawn in two ways, and the consequences are very different:

  • Cancellation: Your GPS was removed because you failed compliance tests. You can reapply after 12 months.
  • Revocation: Your GPS was removed for serious reasons such as fraud or providing false information. You cannot reapply for 5 years.

Check your HMRC letter carefully. It must state which action has been taken and the reason. Understanding the difference is critical for your next steps.

Immediate steps to take

When your GPS is cancelled or revoked, take these actions straight away:

  1. Tell your contractors immediately

    Contact all contractors you work with to explain that your payment status has changed. They will need to verify you with HMRC before your next payment. Be professional - this happens to many subcontractors and contractors understand.

  2. Review your pricing and contracts

    With 20% now being deducted from payments, your immediate cash receipts will drop significantly. On a 10,000 pound contract, you will now receive 8,000 pounds instead of the full amount. Review any contracts in progress and plan for reduced immediate income.

  3. Check your cash position

    Calculate how much working capital you need to cover the next 3 months. Remember you still owe the same tax - you will get the deductions back when you file your return - but you need cash now to pay wages, materials, and overheads.

  4. Set up a reserve for tax

    Oddly, losing GPS means you need to be MORE disciplined about tax reserves. You will get CIS deductions back at year end, but if you spend that refund you may not have enough for your full tax bill. Keep careful records.

  5. Request a review if you think HMRC made an error

    You have 30 days from the decision date to request a review by a different HMRC officer. Only do this if you believe HMRC made a factual error - not just because you disagree with the outcome.

Understanding the cash flow impact

The difference between GPS and net payment status is significant. Here is what the change means in practice:

With GPS (before)
You received 100% of contract value
Without GPS (now)
You receive 80% (20% deducted for HMRC)
On 50,000 pounds of contracts
You now receive 40,000 pounds immediately (10,000 pounds to HMRC)
Getting it back
Deductions offset against your tax bill at year end
Net effect on tax owed
Zero - you owe the same tax either way

The deductions are not lost money - they are advance tax payments. You will either pay less tax at year end, or get a refund if deductions exceed your liability. But the cash flow timing creates real pressure.

When you can reapply for GPS

The waiting period before you can reapply depends on whether your GPS was cancelled or revoked:

After cancellation
12 months from the date GPS was withdrawn
After revocation
5 years from the date GPS was withdrawn
Early application
Will be refused - do not waste time applying before the wait period ends

Building a successful re-application

Once the waiting period has passed, you need to demonstrate you now meet all three GPS tests. HMRC will scrutinise your re-application more closely than a first-time application.

The compliance test - this is critical

Your GPS was almost certainly cancelled because you failed the compliance test. To reapply successfully, you must have 12 months of clean compliance:

  • All Self Assessment returns filed on time (by 31 January)
  • All CIS returns filed on time (by 19th of each month) if you are also a contractor
  • All VAT returns filed on time (from April 2024, VAT compliance is tested)
  • All PAYE/NI payments made on time
  • All CIS deductions paid on time (if you are also a contractor)
  • No outstanding tax debts unless covered by a Time to Pay arrangement

Set up calendar reminders for every deadline. One late return in the 12 months before you reapply will cause refusal.

The turnover test

You must still meet the turnover threshold when you reapply:

  • Sole traders: At least 30,000 pounds net construction turnover in the last 12 months
  • Partnerships: At least 30,000 pounds per partner
  • Limited companies: At least 30,000 pounds per controlling director/shareholder (for close companies)

The business test

You must still be operating as a construction business in the UK, with a UK bank account and valid UTR.

If you disagree with the decision

You have two options if you believe HMRC made an error:

  1. Request an internal review

    Within 30 days of the decision, you can ask a different HMRC officer to review the decision. Write to the address on your cancellation letter explaining why you think the decision is wrong. Include any evidence supporting your case.

  2. Appeal to the tax tribunal

    If the review upholds the decision and you still disagree, you can appeal to the First-tier Tribunal (Tax Chamber). You have 30 days from the review decision to appeal. Tribunal appeals are more formal - consider getting professional advice.

Important: During the appeal process, your GPS remains in force until a final decision is made. However, if the cancellation was for fraud, it can take immediate effect even while you appeal.

Protecting your GPS in future

If you successfully reapply for GPS, protect your status by:

  • Setting up direct debits for all tax payments so you never miss a deadline
  • Filing returns early rather than waiting until the deadline
  • Checking your compliance record regularly via your Business Tax Account
  • Responding promptly to any HMRC correspondence
  • Using accounting software that reminds you of deadlines
  • Getting professional help if you struggle to stay on top of compliance

GPS is a privilege, not a right. HMRC will cancel it again if you fall back into non-compliance. The waiting period increases with repeat failures.

Getting help

If you are struggling with the cash flow impact of losing GPS, or need help preparing to reapply:

  • Accountant or tax adviser: Can help you understand what went wrong and plan for reapplication
  • Time to Pay: If you have outstanding tax debts, call HMRC to arrange a payment plan before this causes further problems
  • Trade associations: Many construction trade bodies offer member support for CIS issues

What you must do as a CIS subcontractor - Gross payment status

Appeal a tax decision

Sign in to your Business Tax Account

Keeping your CIS gross payment status

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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.

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