CIS gross payment status: how to qualify and apply
With gross payment status, contractors pay you in full with no 20% deduction, and you pay your tax yourself. It's a big help with cash flow, but you have to pass HMRC's tests and keep passing them.
On this page
What gross payment status means
Normally a CIS contractor deducts 20% (or 30%) from the labour part of your payments. With gross payment status, GOV.UK says contractors pay you in full, without deductions, and you pay all your tax and National Insurance at the end of the tax year. Sole traders and partners declare the income through Self Assessment; companies through Corporation Tax.
The benefit is cash flow. On £800 of weekly labour that's £160 a week, or nearly £8,000 a year, that stays in your account instead of waiting for a refund. The flip side is discipline: you must set money aside for tax.
The three tests
1. Business test
Your business does construction work (or supplies labour for it) in the UK, and is run through a bank account.
2. Turnover test
HMRC looks at your turnover for the last 12 months, ignoring VAT and the cost of materials. GOV.UK says it must be at least:
| Business type | Minimum construction turnover |
|---|---|
| Sole trader | £30,000 |
| Partnership | £30,000 per partner, or at least £100,000 for the whole partnership |
| Company | £30,000 per director, or at least £100,000 for the whole company |
If a company is controlled by 5 people or fewer, it needs £30,000 annual turnover for each of them. As a guide, a sole trader on £150 a day needs about 200 days of labour in the year to reach £30,000.
3. Compliance test
You've paid your tax and National Insurance on time in the past, and filed your returns on time. Late returns or payments are the most common reason people fail.
Until you qualify, deductions of 20% or 30% are taken from labour. Our CIS invoice guide shows how that looks on an invoice.
How to apply
Apply online or by post using the form for your business type: sole trader, partnership or limited company. Applying also registers you for CIS if you aren't already. Have your UTR, National Insurance number (or company details), and evidence of your turnover ready: invoices, bank statements and CIS statements. Providing false information can lead to a fine.
The annual review
GOV.UK says HMRC reviews your business every year to decide whether you can keep the status, and you must be on time with your tax returns and payments to keep it. If you fail the review, HMRC can remove the status and you go back to deductions, so a single late payment can cost you a year of cash flow.
What changes on your invoices
Very little. You still invoice the full amount, separate materials where relevant, and include your UTR and site details. Contractors verify you with HMRC and are told to pay you gross. Some subcontractors add a note such as "Gross payment status – no CIS deduction", which is a useful reminder but isn't a substitute for the contractor's verification. You'll still get statements showing a zero deduction.
If you're still on 20% deductions, you can get overpaid tax back. See claiming back CIS deductions.
Is it worth it?
- Yes if you have steady CIS income above the turnover threshold, a good record of paying on time, and the discipline to put tax aside, for example 20–25% of each payment in a separate savings account.
- Maybe not if your income varies a lot, you like the "forced saving" of deductions, or your deductions usually come back as a refund anyway.
Frequently asked questions
What turnover do I need for gross payment status?
At least £30,000 in the last 12 months for a sole trader, ignoring VAT and materials. Partnerships and companies have per-person or £100,000 overall tests.
Can I lose gross payment status?
Yes. HMRC reviews it every year, and late returns or payments can lead to it being removed.
Does gross payment status mean I pay less tax?
No. It changes when you pay, not how much. You pay all your tax through your return.
Do I still get CIS statements?
Contractors still report payments to you. Any statement will show no deduction.
Sources
This guide is general information, not legal, tax or financial advice. Rules and rates change, so check the linked GOV.UK pages for the current position.