Gross Payment Status

Key facts

Gross payment status means a 0% CIS deduction rate — the subcontractor receives the full payment.
Applicants must pass three tests: the turnover test, the compliance test, and the business test.
The turnover test requires a minimum of £30,000 net construction turnover (per individual, partner, or relevant person).
The compliance test requires all tax returns filed on time and all tax paid on time.
HMRC reviews gross payment status annually and can withdraw it if the tests are no longer met.

What Is Gross Payment Status?

Under the Construction Industry Scheme, most registered subcontractors have 20% deducted from their payments. However, subcontractors who hold gross payment status (GPS) receive their payments in full — with no CIS deduction.^[1]

GPS is designed for established, compliant businesses that can demonstrate they will meet their tax obligations without the need for deductions at source. It significantly improves cash flow compared to having 20% withheld on every payment.

Cash flow impact: A subcontractor with £200,000 annual turnover would have £40,000 withheld at the 20% rate. With gross payment status, that £40,000 stays in the business throughout the year, significantly improving working capital.

The Three Qualifying Tests

To obtain gross payment status, you must pass all three of the following tests:^[3]

1. The Turnover Test

You must have a minimum level of net construction turnover (excluding VAT and materials) in the 12 months before your application:

Business Type	Minimum Turnover	Notes
Individual (sole trader)	£30,000	Net turnover from construction operations
Partnership	£30,000 per partner	Or £200,000 for the partnership as a whole (whichever is lower)
Company	£30,000 per relevant person	“Relevant person” means each director or beneficial owner, or £200,000 for the company as a whole

The turnover must be from construction operations specifically — other business income does not count towards the threshold.

2. The Compliance Test

Your tax affairs must be up to date. HMRC will check that:^[3]

All tax returns (Self Assessment, Corporation Tax, PAYE, CIS, VAT) have been filed on time
All tax payments have been made on time
There are no outstanding tax debts (other than amounts under formal time-to-pay arrangements)
All CIS returns have been filed on time (if you are also a contractor)

Tip: Even a single late Self Assessment return or a late PAYE payment can cause you to fail the compliance test. If you are planning to apply for gross payment status, ensure your compliance record is spotless for at least the preceding 12 months.

3. The Business Test

You must demonstrate that your business is carried on in the UK through a bank account. Specifically:^[3]

You must have a UK bank account (or building society account) through which your business is conducted
The account must be in the name of the business (or the business owner for sole traders)
Business transactions must flow through this account

This test is designed to ensure the business is genuine and operating in the UK, not a shell entity.

How to Apply for Gross Payment Status

You can apply for GPS when you first register as a CIS subcontractor, or at any later date if your business has grown to meet the qualifying conditions:^[1]

Online — through your HMRC business tax account under the CIS section
Phone — by calling the CIS helpline on 0300 200 3210

HMRC will review your application against the three tests. If approved, your CIS record is updated and contractors verifying you will be told to apply a 0% deduction rate.

HMRC’s Annual Review

HMRC reviews all gross payment status holders annually (usually around March/April) to check they still meet the qualifying conditions.^[2]

During the review, HMRC checks:

Whether all tax returns have been filed on time over the past 12 months
Whether all tax payments have been made on time
Whether the turnover test is still being met
Whether the business test conditions still hold

What Happens If GPS Is Withdrawn?

If HMRC determines you no longer meet the qualifying conditions, they can withdraw your gross payment status:^[2]

HMRC will send you a written notice explaining the reason for withdrawal
You have 30 days from the date of the notice to request a review or appeal
If the withdrawal stands, you revert to the 20% deduction rate (assuming you remain CIS registered)
Contractors verifying you will then be told to deduct at 20% instead of 0%

Common causes of withdrawal: Late Self Assessment filing, late Corporation Tax payment, outstanding VAT returns, or late CIS returns (if you are also a contractor). Even one compliance failure can trigger withdrawal at the annual review.

Reapplying After Withdrawal

If your gross payment status is withdrawn, you can reapply once you have resolved the compliance issues that caused the withdrawal. There is no formal waiting period, but HMRC will want to see that:

All outstanding returns have been filed
All outstanding payments have been made
You have maintained compliance since the issues were resolved

In practice, it is usually advisable to wait until you have a clean compliance record for at least 12 months before reapplying.

Frequently Asked Questions

What is gross payment status?

Gross payment status is a CIS registration level that allows subcontractors to receive payments from contractors with no CIS deductions. Instead of having 20% withheld, the subcontractor receives 100% of the payment and is responsible for paying their own tax through Self Assessment or Corporation Tax.

What are the requirements for gross payment status?

You must pass three tests: (1) the turnover test — at least £30,000 net construction turnover per year for individuals, or £30,000 per partner/relevant person; (2) the compliance test — all tax returns and payments up to date; (3) the business test — your business is carried on through a UK bank account.

Can HMRC take away my gross payment status?

Yes. HMRC reviews gross payment status annually and can withdraw it if you no longer meet the qualifying conditions. Common reasons for withdrawal include late tax returns, late tax payments, or a significant drop in turnover. If withdrawn, you revert to the 20% deduction rate (if still registered).

How long does it take to get gross payment status?

If you apply online and meet all the criteria, HMRC can sometimes approve gross payment status within a few working days. In more complex cases, or if HMRC needs to check your compliance record, it can take several weeks.

Sources

CIS: gross payment status — GOV.UK
Construction Industry Scheme: CIS 340 — HMRC
CIS: gross payment status tests (CISR42020) — HMRC
Finance Act 2004, Schedule 11 – Gross payment — legislation.gov.uk