Gross payment status: how to apply

Gross payment status means contractors pay your invoices in full, with no CIS deduction taken at source. To get it you have to pass three tests: your business does construction work in the UK, it is run through a bank account, and you have paid your tax and National Insurance on time in the past. You also have to meet a turnover test, measured over 12 months and excluding VAT and the cost of materials: at least £30,000 for a sole trader, at least £30,000 for each partner or £100,000 for the whole partnership, and at least £100,000 for a company or £30,000 for each director.

What gross payment status actually changes

It changes cash flow, and nothing else.

Without it, a contractor deducts 20% from the labour element of everything you invoice and sends it to HMRC. You get that back later, through Self Assessment or your company’s return, but later is the problem. Twenty per cent of your labour, sat with HMRC for months, while you’re paying wages and buying materials now.

With gross payment status you’re paid in full and you settle your tax when it’s due, in the normal way.

What it does not do is reduce your tax bill by a penny. You still owe exactly what you owed. This is a timing change, not a discount, and anyone who tells you otherwise is confused about what it is.

The three tests

HMRC needs you to show all three.

The business test. Your business does construction work in the UK, or provides labour for it.

The bank account test. The business is run through a bank account. Not a personal current account with job money running through it alongside the food shop.

The compliance test. You have paid your tax and National Insurance on time in the past. This is the one that fails people, and it is the one you can do something about starting today.

The turnover thresholds

Measured on your turnover for the previous 12 months, excluding VAT and excluding the cost of materials. It is a labour figure, not a headline revenue figure.

Sole trader: at least £30,000

Partnership: at least £30,000 for each partner, or at least £100,000 for the whole partnership

Limited company: at least £100,000 for the whole company, or £30,000 for each director

Company controlled by 5 or fewer people: £30,000 for each of them

The materials exclusion is the bit that catches people out. Turn over £180,000 as a sole trader with £160,000 of that in materials on a couple of big supply-and-fit jobs and your qualifying figure is £20,000. On paper you look comfortably over. On HMRC’s measure you’re under.

Worked example

You’re a sole trader. Last 12 months: £96,000 invoiced, of which £54,000 was materials you bought and £42,000 was labour. VAT excluded from both.

The figure that counts is £42,000. That clears the £30,000 threshold, so the turnover test is passed.

Now the money side of why it’s worth having. On that £42,000 of labour, a contractor deducting at 20% would have held back £8,400 across the year and paid it to HMRC on your behalf. You’d get it back eventually. In the meantime it’s £8,400 you couldn’t use, on a business turning over £96,000.

That’s the whole argument for applying. Not a tax saving. Just your own money, in your account, when you earned it instead of months afterwards.

How to apply

Apply through HMRC, either when you first register for CIS as a subcontractor or later once you qualify. If you’re registering fresh, the online route defaults you to net payment status, so you have to ask for gross specifically.

You’ll need your UTR, your National Insurance number if you’re a sole trader, or your company UTR and registration number.

Then HMRC checks the tests, including your compliance history. If they say no, they tell you why, and the usual reason is the compliance test rather than turnover.

Keeping it

HMRC reviews gross payment status, and they can take it away if your compliance slips. Late returns, late payments, and the status goes back to net.

Losing it is worse than never having had it. You’ve built your cash flow around being paid in full, and then 20% starts coming off again. Filing on time is not admin for its own sake here, it’s the thing keeping the status.

You also still file your CIS returns as normal if you’re a contractor yourself. Gross payment status is about how you get paid, not about your own obligations to subcontractors under you.

Common mistakes

Reading the turnover test as total revenue. It excludes VAT and materials. Work out your labour figure before you decide whether you qualify.

Running the business through a personal account. Straightforward fail on the bank account test.

Applying with a compliance history you haven’t fixed. Late returns and late payments sink the application. Get twelve clean months behind you first.

Expecting a tax saving. You owe the same. It arrives with you first instead of with HMRC.

Assuming it’s permanent. HMRC reviews it and withdraws it when compliance slips.

Do this in FieldHive

Gross payment status stands on a clean compliance record, and that comes from invoicing and filing that don’t slip. Build CIS and VAT invoices free in your browser with the deduction and the reverse charge handled on the same document, so what you invoice matches what gets reported. If you pay subcontractors yourself, the payment and deduction statement generator keeps that side straight too.

Aid, not advice

This guide explains the gross payment status tests so you can work out whether applying is worth your time. It is not tax advice. Whether you qualify depends on your own compliance history and how your turnover breaks down between labour and materials, so check with your accountant or HMRC before applying.

Tests, thresholds and rates checked on gov.uk August 2026: the business, bank account and compliance tests; turnover thresholds of £30,000 and £100,000 excluding VAT and materials; CIS deduction rates 20% / 30% / 0%.