How to Qualify and Apply CIS Gross Payment Status in 2026

Gross Payment Status allows subcontractors registered under the Construction Industry Scheme to be paid in full, instead of having 20% deducted from each payment, as long as they meet HM Revenue and Customs’ business, turnover and compliance tests. 

For businesses that regularly have tax deducted at source, this can make a real difference to cash flow. But getting approved is only the first step. HM Revenue and Customs keeps compliance under review, Value Added Tax has formed part of the test since 6 April 2024, and new anti-fraud rules from 6 April 2026 can make losing Gross Payment Status (GPS) more serious in certain cases.

The deduction is an advance payment towards your tax, not an extra tax charge. The real issue is cash flow. For a sole trader or partner, Construction Industry Scheme deductions are normally dealt with through the Self-Assessment return after the tax year ends. They are set against the tax due, with any excess repaid by HM Revenue and Customs. 

For a limited company, the deductions can be set against Pay As You Earn and other eligible employer liabilities during the year through the Employer Payment Summary. If there is still an excess after the tax year ends, the company can make a claim to have it refunded or used against certain other tax liabilities.

Worked example 

Scenario: A Subcontractor invoices £50,000 for labour on construction work during the year. 

Result: Gross Payment Status leaves £10,000 to £15,000 more cash in the business at the point of payment. Without it, that money is tied up until the deductions are used against tax liabilities or any excess is repaid. 

That extra £10,000 could be the difference between paying the next site's wages from money already in the bank and relying on an overdraft. These figures are illustrative. The actual deduction depends on how much of the payment is subject to the Construction Industry Scheme, including any allowable materials, and how much tax the business ultimately owes.

To qualify for Gross Payment Status, your business must pass three tests set by HM Revenue and Customs: the business test, turnover test and compliance test. Failing any one of them can stop the application from being approved. 

What is the Gross Payment Status Business Test? 

Your business must carry out construction work in the UK, or supply labour for construction work in the UK. 

You must also run the business to a substantial extent through a bank account. In simple terms, HM Revenue and Customs wants to see that there is a genuine construction business operating through an identifiable bank account. 

What is the Gross Payment Status Turnover Test? 

HM Revenue and Customs looks at your net construction turnover for the relevant period. 

Broadly, this is the money your business receives from construction work, excluding Value Added Tax, less the cost of relevant materials used to carry out that work. It is therefore not necessarily the same as the total turnover shown in your accounts. 

Construction turnover can include work carried out for Construction Industry Scheme contractors, private householders and businesses that are not themselves Construction Industry Scheme contractors. 

Turnover from unrelated commercial activities is normally left out of this calculation. However, separate rules can apply where construction work is only an incidental part of a larger non-construction business.

What is the Gross Payment Status Compliance Test? 

The compliance test generally looks at tax obligations falling due during the 12 months before you apply. Returns and payments covered by the test should normally have been made on time, although HM Revenue and Customs allows certain limited failures. 

Value Added Tax is now part of that test. Since 6 April 2024, Value Added Tax filing and payment compliance has been taken into account when deciding whether a business qualifies for or keeps Gross Payment Status. 

HM Revenue and Customs can overlook up to three Value Added Tax returns filed no more than 28 days late and up to three Value Added Tax payments of £100 or more made no more than 14 days late. Late Value Added Tax payments below £100 can also fall within the permitted tolerance. 

These are safety margins, not deadlines to aim for. If you are planning to apply for Gross Payment Status, keeping your returns and payments fully up to date gives you the strongest starting position.

To qualify for Gross Payment Status, HM Revenue and Customs normally looks at your net construction turnover for the 12 months before you apply. 

The amount you need depends on how your business is structured:

For a limited company, the calculation is not always as simple as counting the directors. If the company is a close company, beneficial shareholders can also count as relevant persons. Someone who is both a director and shareholder is counted only once. 

HM Revenue and Customs also looks at the maximum number of relevant persons during the 12 months before the application, so changes in directors or shareholders during the year can affect the turnover you need. 

The £100,000 alternative threshold is particularly useful for larger partnerships and companies because once net construction turnover reaches that level, the £30,000-per-person calculation does not need to be met. 

The application process depends on whether you are already registered under the Construction Industry Scheme. 

If you are not yet registered, you can apply for Gross Payment Status at the same time. If your application is accepted, you will also be registered as a Construction Industry Scheme subcontractor. 

If you are already registered and currently having deductions taken from your payments, you can apply to move to Gross Payment Status. HM Revenue and Customs will then check whether you meet the business, turnover and compliance tests. 

The process is usually: 

Since 6 April 2024, telephone applications are generally no longer available, except for customers who are digitally excluded. 

A little preparation can save a lot of back and forth. Check your turnover and tax compliance before you apply so that any issues can be dealt with before HM Revenue and Customs reviews the application.

A GPS application is not simply a form filling exercise. A turnover figure can look high enough until VAT and materials are removed, while a late VAT, PAYE or CIS filing can affect the compliance test. 

UK Property Accountants can review the turnover calculation, relevant persons, tax filing history and supporting information before the application is submitted. This allows avoidable issues to be identified before HMRC runs the qualifying tests.

Before you apply, make sure your turnover figure is net construction turnover, not simply total business sales. 

You should also check that all relevant tax returns and payments are up to date. 

HM Revenue and Customs can still ask for evidence after approval, including bank statements, invoices and other business records. This is especially important if you have only recently reached the turnover threshold. 

If you cannot easily prove the figures in your application, fix that before you apply.

Gross Payment Status is not permanent. His Majesty’s Revenue and Customs carries out a review six months after approval, then checks again each year. 

If you no longer meet the turnover or compliance rules, His Majesty’s Revenue and Customs can withdraw your status. You will usually be told why and given the chance to respond. 

If the decision stands, Gross Payment Status normally ends after 90 days, and you have 30 days to appeal. 

After a normal cancellation, you will usually have to wait one year before applying again. But for certain fraud or serious non-compliance cases from 6 April 2026, that wait can increase to five years. 

Value Added Tax compliance still matters after approval too. Late returns or payments outside the allowed tolerances can put your status at risk. 

A property business can sometimes sit on both sides of the Construction Industry Scheme. For example, a developer might pay builders on its own projects while also carrying out construction work for another developer. 

Gross Payment Status only affects the payments the business receives as a subcontractor. If the business is acting as a contractor, its usual Construction Industry Scheme responsibilities still apply. 

When it comes to the turnover test, His Majesty’s Revenue and Customs looks at the business as a whole. Qualifying construction income from different sites, customers and projects can be added together. 

The key figure is net construction turnover, which excludes Value Added Tax and allows for relevant material costs. 

So, for a growing property business, several smaller projects could still add up to enough qualifying turnover for Gross Payment Status.

If a subcontractor says they have Gross Payment Status, do not rely on their word alone. Check their status with His Majesty’s Revenue and Customs when verification is required. 

His Majesty’s Revenue and Customs will confirm how the subcontractor should be paid, and you should use that status. 

Gross Payment Status only changes whether tax is deducted from the payment. It does not remove your Construction Industry Scheme responsibilities as a contractor. 

You still need to include payments to that subcontractor on your monthly Construction Industry Scheme return, even when they are paid in full. 

The key point: Gross Payment Status changes the deduction, not your reporting duties.