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CIS Gross Payment Status: Stop 20% Deductions


 

CIS Gross Payment Status: A Subcontractor's Guide to Stopping 20% Deductions

If you're a UK subcontractor, having CIS gross payment status can significantly improve your cash flow. Instead of having 20% tax deducted from every payment under the Construction Industry Scheme (CIS), contractors pay you in full, leaving you responsible for settling your tax through self sssessment or corporation tax.

For many growing construction businesses, this means thousands of pounds remain available to cover wages, materials, equipment, and operating costs instead of being tied up until a tax refund is processed. Understanding who qualifies and how to apply can make a substantial difference to your business.

What Is CIS Gross Payment Status?

CIS gross payment status allows eligible subcontractors to receive payments without CIS deductions from contractors.

Normally:

Payment Status

Contractor Deduction

Gross Payment Status

0%

Registered Subcontractor

20%

Unregistered Subcontractor

30%

Although receiving gross payments improves cash flow, it does not remove your obligation to pay tax. You must still submit accurate tax returns and pay any income tax, national insurance, or corporation tax due.

According to HMRC, gross payment status is available only to subcontractors who meet specific compliance and turnover conditions.

(Source: What you must do as a Construction Industry Scheme (CIS) subcontractor)

Benefits of CIS Gross Payment Status

Many subcontractors apply once their business reaches a consistent level of work because the financial benefits can be significant.

Key advantages include:

  • Improved cash flow: Receive 100% of your invoices instead of waiting for tax repayments.

  • Greater working capital: Pay suppliers, employees, and subcontractors more easily.

  • Professional credibility: Some contractors view gross status as a sign of an established business.

  • Reduced refund delays: Avoid waiting until after your Self Assessment return to reclaim overpaid CIS tax.

Example

A subcontractor invoices £12,000 each month.

Without gross payment status:

  • Invoice: £12,000

  • CIS deduction (20%): £2,400

  • Amount received: £9,600

With gross payment status:

  • Invoice: £12,000

  • CIS deduction: £0

  • Amount received: £12,000

Over a year, that's £28,800 remaining in the business rather than being withheld by HMRC.

Who Qualifies for CIS Gross Payment Status?

To qualify for CIS gross payment status, you must satisfy HMRC's three statutory tests: the business test, turnover test, and compliance test. If approved, contractors pay you in full without deducting the standard 20% CIS tax from your invoices.

1. You Must Operate a Genuine Construction Business

HMRC requires you to be actively carrying out construction work or supplying labour for construction work in the UK. Your business must also be operated through a business bank account.

2. You Must Meet the Turnover Test

HMRC looks at your net construction turnover over the previous 12 months. This excludes VAT and the cost of materials.

The minimum turnover requirements are generally:

  • Sole traders: At least £30,000

  • Partnerships: £30,000 per partner or £100,000 for the partnership

  • Limited companies: £30,000 per director or £100,000 for the company

  • Close companies (controlled by five or fewer people): £30,000 for each controlling person

3. You Must Pass the Compliance Test

HMRC reviews your tax compliance history. In most cases, you must have:

  • Filed your Self Assessment, Corporation Tax, VAT, and PAYE returns on time (where applicable)

  • Paid your taxes and National Insurance by the deadlines

  • Kept your tax affairs up to date with no serious compliance failures

Repeated late returns, unpaid tax, or persistent compliance issues can result in your application being refused or your gross payment status being withdrawn.

How to Apply for CIS Gross Payment Status

If you meet HMRC's eligibility requirements, you can apply for CIS gross payment status either when you first register as a subcontractor or at a later date if you're already registered under the Construction Industry Scheme (CIS). Applications can be submitted online through your Government Gateway account or by completing the appropriate paper form for your business type. 

Step 1: Check That You Qualify

Before applying, make sure you meet HMRC's three qualifying tests:

  • Business test: You operate a genuine construction business in the UK.

  • Turnover test: Your construction turnover meets the required threshold.

  • Compliance test: Your tax returns and tax payments are up to date. 

Applying before you satisfy these conditions is one of the most common reasons applications are refused.

Step 2: Gather Your Information

You'll typically need the following details before starting your application:

  • Unique Taxpayer Reference (UTR)

  • National Insurance number (or company registration details for limited companies)

  • Business bank account details

  • Construction turnover for the previous 12 months

  • Evidence of turnover, such as invoices, CIS payment and deduction statements, or bank statements

  • VAT and PAYE references, if applicable

Step 3: Complete the Correct Application

The application form depends on your business structure:

You can submit the application online or by post.

Step 4: HMRC Reviews Your Application

Once your application is received, HMRC checks whether you satisfy the business, turnover, and compliance tests. If you're already registered for CIS, you'll continue under the standard 20% deduction rate while your application is being assessed. 

HMRC may contact you if they need additional information or evidence before making a decision.

Step 5: Receive Your Decision

If your application is successful, you'll be granted CIS gross payment status, and contractors will begin paying your invoices without making CIS deductions. You'll remain responsible for paying your income tax, national insurance, or corporation tax directly to HMRC through your annual tax return. 

Keep Your Gross Payment Status

Approval is not permanent. HMRC carries out ongoing compliance reviews, so you should continue to:

  • File tax returns on time.

  • Pay tax liabilities by the due dates.

  • Keep VAT and PAYE obligations up to date, where applicable.

  • Maintain accurate accounting records.

Failing to meet these obligations could result in HMRC withdrawing your gross payment status. 

(Source: How to Register - CIS Gross Payment Status)

Final Thoughts

For many UK subcontractors, CIS gross payment status provides a major cash flow advantage by eliminating automatic 20% CIS deductions. However, approval depends on consistent tax compliance, qualifying turnover, and meeting HMRC's eligibility rules.

If your construction business has grown and you're tired of waiting for CIS tax refunds, reviewing your eligibility could be worthwhile. A professional accountant can also help identify any compliance issues before you apply, improving your chances of approval.


Disclaimer: This article is for general information only and should not be treated as financial or tax advice. Tax rules may change, and individual circumstances vary. Always seek professional advice before making tax or business decisions.
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