Keeping your CIS gross payment status

If you have gross payment status (GPS) under the Construction Industry Scheme, you receive the full value of your construction payments without the standard 20% deduction. This significantly improves your cash flow, but GPS is not permanent.

HMRC reviews your GPS annually and can withdraw it if you fail the compliance test. Losing GPS can be devastating for your cash flow - instead of receiving 100% of contract payments, you will only receive 80%. This guide explains how to protect your GPS.

GPS is not permanent

Many subcontractors assume that once they have GPS, they will keep it indefinitely. This is not the case. HMRC reviews every GPS holder to check they still meet the eligibility requirements.

The key requirement is the compliance test. You must continue filing all tax returns on time and paying all taxes by their deadlines. A pattern of late filing or late payment - even for small amounts - can lead to GPS cancellation.

When HMRC reviews your GPS

Understanding when and how HMRC reviews your status helps you prepare and stay compliant throughout the year.

Early warning signs your GPS is at risk

Do not wait for HMRC to contact you. If any of the following apply to your business, take action immediately to protect your GPS:

Filing issues

• Late Self Assessment return: Even one return more than 28 days late can trigger cancellation
• Late VAT returns: From April 2024, VAT compliance is part of the GPS test. Up to 3 late VAT returns are tolerated only if each is no more than 28 days late - a fourth late return, or any single return more than 28 days late, fails the test
• Late CIS returns: If you are also a contractor, late CIS monthly returns count against you
• Companies House filings: For limited companies, late accounts or confirmation statements count as compliance failures

Payment issues

• Outstanding tax debt: Any unpaid tax without a Time to Pay arrangement is a warning sign
• Late payments of 100 pounds or more: Up to 3 late payments of 100 pounds or more are tolerated only if each is no more than 14 days late - a fourth late payment, or any single payment more than 14 days late, fails the test (late payments under 100 pounds are disregarded)
• PAYE or NI arrears: If you have employees, falling behind on PAYE or NI affects your GPS

HMRC contact

• Information requests: Failing to respond to HMRC requests within the required timeframe triggers immediate review
• Compliance enquiry: An ongoing tax enquiry may indicate HMRC is already concerned about your compliance
• Penalty notices: Receiving penalties for late filing or payment is a clear warning sign

How to protect your GPS

Keeping GPS requires proactive management, not just reacting when things go wrong. Follow these practices throughout the year.

Set up calendar reminders

Create reminders at least one week before every deadline:

• Self Assessment: 31 January (online) or 31 October (paper)
• VAT returns: Quarterly deadlines (one month and 7 days after quarter end)
• CIS returns: 19th of each month (if you are also a contractor)
• Corporation Tax: 12 months after accounting period end (filing), 9 months and 1 day (payment)
• Companies House: Annual accounts and confirmation statement deadlines

Pay electronically before deadlines

Electronic payments can take time to process. Allow at least 3 working days for Bacs payments. Same-day payment options (Faster Payments, CHAPS) give you more flexibility but should not be relied upon regularly.

Check your compliance record

Periodically review your HMRC business tax account to check:

• All returns show as filed
• No outstanding payments are recorded
• No penalties or interest charges are showing

If you see anything unexpected, contact HMRC immediately to resolve it before the annual review.

Set aside money for tax

With GPS, no deductions are made from your payments. This means you must manage your cash flow carefully to ensure you can pay your tax bills when they fall due. A good practice is to transfer a percentage (typically 20-30%) of each payment received into a separate account for tax.

If you are struggling to pay on time

If you anticipate difficulty paying a tax bill on time, contact HMRC before the deadline. You may be able to arrange a Time to Pay (TTP) agreement.

Time to Pay agreements

A TTP agreement allows you to spread tax payments over a period (typically up to 12 months). If you have a TTP arrangement in place:

• Payments made within the TTP schedule are not counted as late
• Your GPS compliance test may not be affected, provided you stick to the arrangement
• HMRC may still charge interest on the outstanding amount

Contact the Business Payment Support Service on 0300 200 3835 as soon as you know you will have difficulty paying. The earlier you contact them, the more options you have.

Understanding GPS cancellation and revocation

If HMRC decides to withdraw your GPS, the consequences depend on whether your status is cancelled or revoked. The difference is significant.

What to do if you receive a cancellation notice

If HMRC notifies you that your GPS will be cancelled:

Step 1: Check the reasons carefully

The notice will explain which compliance failures triggered the decision. Check whether:

• The information is accurate (HMRC records sometimes have errors)
• There were circumstances that explain the failures
• You have evidence that payments or filings were actually made on time

Step 2: Decide whether to appeal

You have 30 days from the date of the decision to request a review. Consider appealing if:

• HMRC's records are incorrect
• There was a reasonable excuse for the failures (serious illness, bereavement, fire, flood)
• HMRC failed to follow proper procedures

During the appeal process, your GPS remains in force until a final decision is made (except in fraud cases).

Step 3: Prepare for the cash flow impact

If cancellation proceeds, you will revert to net payment status. This means:

• Contractors will deduct 20% from future payments
• Your cash flow will reduce immediately
• You should notify your bank and any finance providers if you have loans or credit facilities
• Consider whether you need to adjust payment terms with your own suppliers

Step 4: Plan your re-application

After cancellation (not revocation), you must wait 12 months before re-applying. Use this time to:

• Resolve all outstanding compliance issues
• Build a clean 12-month compliance record
• Address whatever caused the original failures

Maintaining GPS after April 2024

From 6 April 2024, the GPS compliance test includes VAT compliance. This means:

• Late VAT returns count towards your compliance failures
• Late VAT payments count towards your payment failures
• Outstanding VAT debts (without a TTP arrangement) can trigger cancellation

If you are VAT registered, your VAT compliance is now as important as your Self Assessment compliance for keeping GPS.

Supply chain fraud measures (in force since 6 April 2026)

Since 6 April 2026, HMRC has additional powers to cancel GPS immediately where a business made or received a payment it knew or should have known was connected to the fraudulent evasion of tax (Finance Act 2026, section 220, amending the Finance Act 2004). A fraud-based cancellation carries a 5-year bar on reapplying. Even if you are not directly involved in fraud, operating in a supply chain where fraud is occurring could put your GPS at risk.

To protect yourself:

• Know who you are working for and who is in your supply chain
• Be wary of unusual payment arrangements or pressure to use specific subcontractors
• Keep records of your due diligence on contractors and projects
• Report any concerns about fraud to HMRC's Fraud Hotline: 0800 788 887