CIS gross payment status means contractors pay you in full, with nothing held back for HMRC. To get it you prove three things: that you run a real construction business through a bank account, that your turnover clears the threshold, and that your tax record for the last 12 months is clean. Keep it, and your bank balance looks very different at the end of every month. Lose it, and you're back to waiting on refunds.
This is the overview: what gross status changes, how HMRC decides, what you sign up to once you have it, and what moved on 6 April 2026. If you're still getting your head round how deductions work in the first place, read our plain guide to CIS deductions → first and come back.
What CIS gross payment status actually changes
Under the Construction Industry Scheme a contractor paying a registered subcontractor deducts 20% from the labour part of the invoice and passes it to HMRC. If the subbie isn't registered at all, that becomes 30%. With gross status the rate is 0%. People search for it every way round, "gross status CIS", "gross payment CIS", "CIS gross status", and they all mean the same thing. The contractor still verifies you with HMRC and still reports what they paid you on their monthly return. They just don't keep any of it back.
The deductions were never an extra tax. They're an advance payment towards your own Income Tax and National Insurance, or your company's tax bill. The trouble is that for most subbies the advance runs well ahead of what they actually owe, and they only get the difference back after the tax year ends. Gross status stops you lending HMRC that money in the meantime.
Example: one month's labour invoice
A groundworks subbie invoices £8,000 for labour (no materials, VAT left out to keep it simple).
| Registered (20%) | Gross status | |
|---|---|---|
| Labour invoiced | 8,000 | 8,000 |
| CIS deduction | (1,600) | 0 |
| Cash in your bank | 6,400 | 8,000 |
Do that every month for a year and £19,200 has gone to HMRC in advance. Some of it covers your real tax. The rest sits with HMRC until you claim it back.
The three tests HMRC applies
The business test
Your business has to be doing construction work in the UK, or supplying labour for it, and it has to be run through a bank account. Most people sail through this. Where it gets messy is a sole trader whose contractor payments land in the same personal account as the mortgage and the weekly shop. It isn't automatically fatal, but a separate business account with the contractors' payments going straight into it makes the evidence simple.
The turnover test
HMRC looks at your turnover for the 12 months before you apply, ignoring VAT and the cost of materials. The minimum figures on gov.uk are:
- sole trader: £30,000
- partnership: £30,000 for each partner, or £100,000 for the whole partnership
- limited company: £30,000 for each director, or £100,000 for the whole company
In a company controlled by five people or fewer, beneficial shareholders count alongside directors when HMRC works out the per-person figure. A small family company where a spouse holds shares but isn't a director can find its threshold is higher than it expected.
The compliance test
This is the one that matters most, and it doesn't stop once you're approved. HMRC wants to see that over the previous 12 months you filed and paid on time: Self Assessment or Corporation Tax, PAYE, VAT and, if you pay subbies yourself, your CIS returns and deductions. There's a small allowance for slips. HMRC's own manual allows, for example, up to three late CIS or VAT returns (each no more than 28 days late) and up to three late payments of £100 or more (each no more than 14 days late). Past that, expect a refusal.
Notice VAT is on the list. We see subbies who are careful with CIS but treat the VAT quarter as something that gets paid when the cash allows. For gross status purposes a late VAT payment counts against you just the same.
What you take on once you have it
Nobody is taking tax off your invoices any more, so you have to do it yourself. With gross payment status you declare the full payments as income on your Self Assessment or Company Tax Return and pay the bill when it falls due. The firms that come unstuck are the ones who treat the extra 20% landing in the account as extra profit. It isn't. How to set aside for tax so it never catches you out →
Then there's the annual review. HMRC checks every year whether you still meet the conditions. If it decides to withdraw your status, it writes to explain which conditions you've failed, you have 30 days from the date of that letter to appeal, and the change takes effect 90 days later. Once it's cancelled you normally wait a year before you can reapply.
The April 2026 fraud rules and CIS gross payment status
From 6 April 2026 HMRC has sharper powers aimed at fraud in construction labour supply chains. Where a business knew, or should have known, that a transaction it entered into was connected with the fraudulent evasion of tax, HMRC can:
- cancel gross payment status immediately, with no 90 day run-off
- bar the business from reapplying for 5 years instead of 1
- make the business liable for the lost tax, with a penalty of up to 30% of it, which can also be charged to directors and other connected people
"Should have known" is the phrase to take seriously. It means HMRC can act without proving you were in on it, if the warning signs were there. A labour-only outfit nobody has heard of quoting well under the going rate. A subbie whose company name changes every few months. A request to pay the money into somebody else's account. If you hold gross status and use subbies yourself, the checks you do on them now protect your own status.
The same date brought back compulsory nil CIS returns for contractors who haven't told HMRC in advance that they're inactive. A missed nil return is a late return, and late returns count against the compliance test.
Is it worth applying?
For an established subbie comfortably over the threshold, usually yes. The cash flow difference shows up from the first payment. But it only works if the office side is disciplined: returns in on time, tax money set aside, the VAT quarter paid on the due date. If your cash is already tight enough that HMRC payments sometimes slip, fix that first, because a refusal or a withdrawal is worse than never applying. A rolling forecast is the easiest way to see the tax bills coming. See how 13-week cash flow forecasting works →
Structure makes a difference too. A sole trader needs £30,000; a company with three directors needs £90,000 on the per-person test, or £100,000 on the whole-company test. If you're thinking about incorporating, it's worth running those numbers first. Sole trader or limited company? A building contractor's guide →
How to apply, briefly
You can apply online through HMRC using your Government Gateway login, or on paper: form CIS302 for sole traders, CIS304 for partnerships and CIS305 for limited companies. Have your UTR, bank details and 12 months of turnover evidence ready: bank statements, payment and deduction statements, invoices and contracts. Companies also need details of each director. If HMRC turns you down, it writes with the reasons and tells you how to appeal.
Frequently asked questions
What is CIS gross payment status?
It is a status HMRC gives to subcontractors who pass its business, turnover and compliance tests. Contractors then pay you in full without deducting 20% or 30% for HMRC, and you pay your own tax through your Self Assessment or Company Tax Return.
What turnover do I need for CIS gross status?
Ignoring VAT and materials, you need at least £30,000 over the last 12 months as a sole trader. Partnerships and companies need £30,000 per partner or director (and per beneficial shareholder in a company controlled by five or fewer people), or £100,000 for the whole business.
Can I have a late tax payment and still get gross payment status?
HMRC allows a small number of slips, for example up to three payments of £100 or more that were no more than 14 days late in the last 12 months. More than that, or anything later, is likely to fail the compliance test.
What changed for gross payment status in April 2026?
From 6 April 2026 HMRC can remove gross payment status immediately where a business knew or should have known a transaction was connected with tax fraud. The business can then be barred from reapplying for 5 years and face penalties of up to 30% of the lost tax, which can extend to directors.
Want to know if you'd qualify for gross status?
Book a free, no-obligation discovery call and we'll check your turnover and compliance record against HMRC's tests before you apply.
Schedule a CallThis article is general guidance for building contractors, not advice for your specific situation. Always review your own circumstances with your accountant before acting.
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