Keep and maintain your gross payment status

Phase 1: Understanding what is at stake

You worked hard to get your gross payment status (GPS). You met the turnover test, passed the compliance test, and can now receive 100% of your construction payments without deductions. But GPS is not permanent.

Allow 15 minutes to complete this learning path. By the end, you will understand how HMRC reviews your GPS, what can cause you to lose it, and the practical steps to protect your status.

Why GPS maintenance matters

Losing GPS has an immediate and significant impact on your cash flow:

• With GPS: You receive 100% of contract payments
• Without GPS: Contractors deduct 20% from every payment
• Cash flow impact: On £100,000 of annual contracts, losing GPS means £20,000 less cash in your bank account until you reclaim it through Self Assessment

Beyond cash flow, losing GPS can affect your relationships with contractors and your ability to take on larger projects that require upfront material costs.

Cancellation vs revocation: know the difference

If HMRC withdraws your GPS, the consequences depend on whether your status is cancelled for compliance failures or revoked for fraud. This distinction is critical. (The legislation calls both actions "cancellation" - FA 2004 section 66 - but the grounds and the bar on reapplying differ sharply.)

Phase 2: Assess your compliance health

Before you can protect your GPS, you need to understand your current position. This phase helps you identify whether your GPS is secure or at risk.

Self-assessment checklist: Is your GPS at risk?

Answer these questions honestly to assess your current compliance health:

Filing compliance

• Have you filed all Self Assessment returns on time in the last 12 months?
• Have you filed all VAT returns on time (VAT has been part of the GPS test since 6 April 2024)?
• If you are also a contractor, have you filed all CIS monthly returns on time?
• For limited companies: Are your Companies House accounts and confirmation statements up to date?

Payment compliance

• Have you paid all PAYE, National Insurance, and CIS deductions on time?
• Have you paid all VAT on time?
• Do you have any outstanding tax debts without a Time to Pay arrangement?
• Have you received any late payment penalties in the last 12 months?

HMRC interactions

• Have you responded to all HMRC information requests within the required timeframe?
• Are you subject to any ongoing compliance enquiry or investigation?
• Have you received any penalty notices for late filing or payment?

If you answered "no" to any of these questions, your GPS may be at risk. Continue through this journey to learn how to address issues before your next annual review.

Phase 3: Set up protective measures

Keeping GPS requires proactive management throughout the year, not just reacting when problems arise. This phase covers the systems and habits you need to protect your status.

Key protective actions

1. Create a compliance calendar

Set reminders at least one week before every deadline:

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

2. Set aside money for tax

With GPS, no deductions are made from your payments. You must set aside money yourself:

• Transfer 20-30% of each payment received into a separate account for tax
• Do not treat this money as available for business expenses
• Budget based on your likely tax bill, not just the 20% that would have been deducted

3. Pay electronically before deadlines

Allow processing time for payments:

• Bacs payments: Allow 3 working days
• Faster Payments: Usually same day, but allow 1 day buffer
• CHAPS: Same day, but expensive - use for emergencies only

4. Review your compliance record monthly

Do not wait for the annual review. Log in to your HMRC business tax account monthly to check:

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

If anything looks wrong, contact HMRC immediately to resolve it.

Phase 4: Understand the compliance thresholds

HMRC allows some tolerance for minor administrative errors. Understanding exactly what is permitted helps you know when you are still safe and when you have a problem.

What triggers immediate review

HMRC picks the date of each check at random, so you cannot predict it. It can bring a check forward if it sees failures building up, for example when a contractor files four or more monthly returns late. If it has grounds to suspect fraud, or the supply chain rules below apply, it can cancel your status with immediate effect.

VAT compliance counts towards GPS

From 6 April 2024, the GPS compliance test includes VAT. This is a significant change:

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

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

Phase 5: If your GPS is threatened

Despite your best efforts, you may find yourself at risk of losing GPS. This phase covers how to respond to threats and recover if the worst happens.

If you are struggling to pay on time

Contact HMRC before the deadline if you cannot pay a tax bill. You may be able to arrange a Time to Pay (TTP) agreement:

• Payments made within a 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.

If you receive a cancellation notice

If HMRC notifies you that your GPS will be cancelled:

1. Check the reasons carefully: Verify HMRC's information is accurate. Their records sometimes have errors.
2. Decide whether to appeal: You have 30 days to request a review. Appeal if HMRC's records are incorrect, there was a reasonable excuse for failures, or HMRC failed to follow proper procedures.
3. Prepare for the cash flow impact: If cancellation proceeds, you will revert to 20% deductions. Notify your bank and finance providers if you have loans or credit facilities.
4. Plan your re-application: After cancellation (not revocation), you must wait 12 months before re-applying. Use this time to build a clean compliance record.

Contingency planning: Managing without GPS

If you lose GPS, you need to manage the transition to net payment status. Understanding how to optimise your cash flow under deductions will help you recover.

Summary: Your GPS maintenance checklist

Keep your GPS by following these ongoing practices: