Receiving a notice that your Gross Payment Status (GPS) has been withdrawn is stressful.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.
First, check exactly what happened
GPS can be withdrawn in two ways, and the consequences are very different. Check your HMRC letter carefully. It must state which action has been taken and the reason, and the difference decides your next steps.
Immediate steps to take
When your GPS is cancelled or revoked, take these actions straight away:
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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.
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Review your pricing and contracts
With 20% deducted from payments, your immediate cash receipts will drop significantly. On a £10,000 contract, you receive £8,000 instead of the full amount. Review any contracts in progress and plan for reduced immediate income.
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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.
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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.
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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
- 100% of the payment
- Without GPS
- 80% (20% deducted for HMRC)
- £50,000 of labour (excluding materials and VAT)
- £40,000 received, £10,000 to HMRC
- Deductions recovered
- Against your tax bill at year end
- Extra tax owed
- None
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
- After fraud-based cancellation (revocation)
- 5 years (1 year for withdrawals before 6 April 2026)
Building a successful re-application
HMRC refuses any application made before the waiting period ends. Once it has passed, you need to show that you 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 and National Insurance 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:
- As a sole trader, you need at least £30,000 net construction turnover in the last 12 months.
- A partnership needs at least £30,000 per partner, or at least £100,000 for the whole partnership.
- A limited company needs at least £30,000 per director, or at least £100,000 for the whole company. A company controlled by 5 or fewer people needs £30,000 per controlling person.
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:
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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.
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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.
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.
Getting help
If you are struggling with the cash flow impact of losing GPS, or need help preparing to reapply:
- An accountant or tax adviser can help you understand what went wrong and plan your reapplication.
- If you have outstanding tax debts, call HMRC to arrange a Time to Pay plan before they cause further problems.
- Many construction trade bodies offer member support for CIS issues.
What you must do as a CIS subcontractor - Gross payment status (opens in a new tab)