What is CIS Gross Payment Status?
Gross payment status is approval from HMRC that allows a CIS subcontractor to receive payments in full, without any CIS deduction. Instead of having 20% withheld by every contractor you work for, you receive 100% of your invoiced amount and manage your own tax payments directly with HMRC.
This is the goal for most established subcontractors. Better cash flow, fewer administrative headaches, and no waiting for CIS refunds through Self Assessment.
Who Can Apply?
Gross payment status is not available to everyone. HMRC applies three tests, and you must pass all three.
Test 1: The Compliance Test
Your tax affairs must be fully up to date. HMRC checks the previous 12 months and will refuse gross payment status if any of the following were late:
- Income tax / Self Assessment returns and payments
- Corporation tax returns and payments (companies)
- PAYE and National Insurance payments
- VAT returns and payments
- CIS returns (if you are also a contractor)
HMRC allows for some minor failures if they were trivial and isolated, but repeated late submissions or payments will usually result in refusal.
Test 2: The Business Test
- Your business must have been carrying out construction operations in the UK for at least 12 months
- The business must be conducted through a bank account
- The business must be genuine — HMRC can refuse applications from businesses that appear to exist primarily to obtain gross payment status
Test 3: The Turnover Test
HMRC requires a minimum annual turnover from construction work (net of materials). The thresholds are:
| Business Type | Minimum Annual Turnover |
|---|---|
| Sole trader | £30,000 |
| Partnership (per partner) | £30,000 (max £200,000) |
| Company (per director, up to 10 directors) | £30,000 per director |
| Company (more than 10 directors) | £30,000 per director up to £100,000, then £10,000 per additional director |
The turnover figure is your labour income (excluding materials costs and VAT).
How to Apply for Gross Payment Status
Online Application
Log in to your Government Gateway account and access the CIS section. Select "Apply for gross payment status" and complete the online form. You will need:
- Your UTR number
- Details of your turnover for the past 12 months
- Confirmation that your compliance record is clean
HMRC usually processes applications within 28 days. You will receive a decision by post.
Phone Application
Call HMRC's CIS helpline on 0300 200 3210 (Monday to Friday, 8am to 6pm). Have your financial details ready.
What to Do After Approval
Once HMRC approves your gross payment status:
- Tell your contractors — they will re-verify you with HMRC and see your 0% rate
- Update your invoices — you no longer need to show a CIS deduction line
- Set up tax payments directly — you will pay income tax and National Insurance through Self Assessment rather than having it withheld. Budget for this — set aside 20–25% of income for tax
Keeping Your Gross Payment Status
HMRC reviews gross payment status annually. If your compliance record deteriorates — even one late VAT return — HMRC can cancel your status at any time.
Tips for keeping your status:
- Set up direct debits for all HMRC payments
- File returns early — don't wait for deadlines
- Use accounting software that alerts you to upcoming due dates
- Have your accountant review your compliance record before renewal
What Happens if Your Status is Cancelled?
If HMRC cancels your gross payment status, your contractors must immediately switch to deducting at 20% (or 30% if you were also deregistered from CIS). You can reapply, but HMRC usually makes you wait 12 months and demonstrate a clean compliance record.
The notification process: HMRC writes to you with 90 days' notice that they intend to cancel your status. You can appeal within 30 days if you believe the cancellation is incorrect.
Gross Payment Status vs Regular CIS Registration: Cash Flow Impact
Let's compare a subcontractor with £80,000 annual labour turnover:
| Registered (20%) | Gross Payment Status (0%) | |
|---|---|---|
| Monthly labour income | £6,667 | £6,667 |
| CIS deduction | £1,333 | £0 |
| Received each month | £5,333 | £6,667 |
| Annual extra cash available | — | +£16,000 |
The £16,000 is eventually returned via Self Assessment refund (if no other tax is owed), but having it available throughout the year rather than waiting for an annual refund makes a significant difference to working capital.
Gross Payment Status and Self Assessment
Having gross payment status does not eliminate your Self Assessment obligations. You still file an annual Self Assessment return and pay income tax and National Insurance on your profits. The difference is that you pay HMRC directly (usually in two payments on 31 January and 31 July) rather than having deductions made upfront by contractors.
Good cash management is essential. Many subcontractors with gross payment status put aside 20% of every invoice into a savings account specifically for their tax bill.
FlashBill and Gross Payment Status
In FlashBill, set your client's CIS rate to 0% to reflect your gross payment status. Your invoices will show no CIS deduction line — just a clean invoice for the full amount. Try FlashBill free →