CIS Gross Payment Status: Getting Paid With Nothing Held Back

↑ Part of the Tax & VAT series · CIS for Subcontractors, Explained Simply

Gross payment status is the 0% tier of CIS: contractors pay you in full, with no 20% deducted at source, and you pay your own tax through Self Assessment or Corporation Tax like any other business. For a subcontractor it's the difference between financing HMRC all year out of your cash flow and holding your own money until tax is actually due. You have to apply for it, pass three tests, and — the part trades underestimate — keep passing them, because HMRC reviews it every year and takes it away for sloppiness.

This is a detail page under our CIS for Subcontractors guide, which covers the scheme itself — the 20% and 30% rates, and the labour/materials split.

Part 1What it's worth to you

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Under standard CIS, a contractor deducts 20% of your labour before you see it. On £60,000 of labour in a year that's £12,000 of your money sitting with HMRC ahead of time — often more than your actual final bill once expenses are in, which is why so many subbies get a refund every year. A refund is not a bonus: it's your own working capital, lent to HMRC interest-free, arriving back months after you needed it for materials, the van and the quiet weeks. Gross status keeps that £12,000 in your account all year, working for you, until tax is genuinely due.

The flip side is discipline: nothing has been deducted, so the tax bill at year end is all yours. The trades who thrive on gross status put a slice of every payment into a separate tax account and don't touch it.

Part 2The three tests

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The business test. You do construction work (or supply labour for it) in the UK, and you run the business through a bank account. Almost every genuine trade passes this one without thinking.

The turnover test. HMRC looks for net construction turnover — labour, excluding materials and VAT — in the last 12 months of at least:

• £30,000 as a sole trader,
• £30,000 per partner in a partnership, or £100,000 for the whole partnership,
• £30,000 per director of a company, or £100,000 for the whole company.

A full-time subbie usually clears the sole-trader bar comfortably. Check the current figures on GOV.UK when you apply.

The compliance test. The one that actually decides it. Your tax affairs have to be in order and on time: returns filed by their deadlines, tax and National Insurance paid when due — and, since April 2024, VAT compliance counts too. HMRC allows a little minor lateness, but a pattern of late returns or unpaid bills fails the test. In short: HMRC gives up its safety deposit only for people who've shown they don't need one.

Part 3How to apply, and how you lose it

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Apply through your Government Gateway account (or ask your accountant). If you're granted gross status, contractors verify you as normal and HMRC tells them to pay you without deduction — the change reaches you through the same verification system the rest of CIS runs on.

Then HMRC reviews your compliance every year, automatically. Fail the review — late returns, unpaid tax, VAT problems — and they'll write to you cancelling gross status, with a right of appeal. Losing it hurts twice: you drop back to 20% deductions, and every contractor who verifies you finds out why. The maintenance cost of gross status is simply being boringly on time with HMRC, forever.

Common questionsGross payment status FAQ

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Is gross payment status the same as being outside CIS?

No. You're still inside CIS — contractors still verify you and report your payments monthly. The only change is the deduction rate: 0% instead of 20% or 30%.

What turnover do I need for gross payment status?

Net construction turnover (labour, excluding materials and VAT) of £30,000 as a sole trader in the last 12 months. Partnerships and companies need £30,000 per partner/director, or £100,000 overall.

Does materials income count towards the turnover test?

No — the test looks at construction turnover net of materials. A materials-heavy trade can have a big gross turnover and still need to show the £30,000 of labour underneath it.

Why would HMRC take gross status away?

A failed annual compliance review: late returns, late payments, or VAT failures. One slightly late filing is usually survivable; a pattern isn't. Set reminders for every HMRC deadline the day you're granted it.

Do I still get payment statements from contractors?

You should still get the monthly paperwork trail contractors owe you under the scheme, and you'll want it — clean records of who paid you what are exactly what keeps the compliance test passed and the year-end return easy.

This guide is general information for UK tradespeople, current to the best of our knowledge in 2026. Rules, rates and thresholds change, and how they apply depends on your specific circumstances. It is not tax, accounting or legal advice. Always confirm your position with HMRC, a qualified accountant or a solicitor before relying on it. TradeDraft accepts no liability for decisions made on the basis of this guide. Questions: hello@tradedraft.co.uk.

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