CIS · Guide · 7 min read

Gross payment status: getting paid with nothing held back

The 20% coming off every invoice is not extra tax, but it is your cash flow living at HMRC until year end. Gross payment status turns the tap back on. Here is how it works and how people lose it.

By Connor McKay, founder of Trade PA · 25 August 2026

What it actually changes

With standard CIS status, contractors deduct 20% of your labour and send it to HMRC on account of your tax. You get it back, eventually, when your return is done, but in the meantime a fifth of your labour income is not in your bank account smoothing the gap between paying for materials and getting paid for jobs. Gross payment status means contractors pay you in full, deductions of zero, and you settle your tax through your own return like any other business. On £80,000 of labour in a year, that is £16,000 of your own money flowing through your account instead of waiting at HMRC. For a growing subbie taking on bigger jobs with bigger material outlays, that difference is often the whole ballgame.

The trade-off is discipline: nothing is being held back, so the tax bill at year end is entirely yours to have provisioned for. Gross status rewards the subbie who moves a percentage into a separate pot every month and punishes the one who treats the gross payment as all spendable.

The three tests

1. The business test

You do construction work (or supply labour for it) in the UK, and you run it as a real business through a bank account. Straightforward for almost everyone genuinely trading.

2. The turnover test

HMRC looks at your labour turnover (net of materials and VAT) over the last 12 months. The headline thresholds: £30,000 for a sole trader; for partnerships and companies, £30,000 per partner or director, or £100,000 or more for the whole business as an alternative route. Check the current figures on gov.uk when you apply, but the shape has been stable for years: this is a test designed to reserve gross status for established operations rather than first-year startups.

3. The compliance test

The one that actually decides most applications. HMRC reviews whether your tax affairs have been in order in the review period: returns filed on time, tax paid on time, across self assessment or corporation tax, PAYE, VAT and CIS. There is limited tolerance for minor slips, but a pattern of late filing or late payment fails the test. Blunt translation: gross status is HMRC extending trust, and the compliance test is them checking your record of deserving it.

Applying, and keeping it

You can apply when you register for CIS or later, online through your Government Gateway (or your accountant does it). If refused, you can appeal or reapply once the compliance picture improves.

Keeping it is the part people underestimate. HMRC reviews gross status holders regularly, and the same compliance test applies on an ongoing basis: start filing late or paying late and the status gets withdrawn, with an appeal window if you have a reasonable excuse. Losing it is expensive twice over: your cash flow reverts to minus 20%, and every contractor you work for gets notified of the change, which is not the letter you want landing on their desk. The subbies who hold gross status for years are, without exception, the ones whose returns and payments run like clockwork.

Is it worth it for you?

• Clearly yes if you are past the turnover threshold, your compliance record is clean, and material-heavy jobs keep squeezing your cash flow.
• Not yet if your filing history has wobbles: fix twelve clean months first, because a refused application does not help you.
• Be honest with yourself about the discipline point. If the 20% deduction has been functioning as your accidental tax savings account, set up a real one before you switch it off.

Whichever side you are on, the machinery matters: on standard status you need every deduction statement captured so you get your money back at year end; on gross status your own record-keeping is the only thing standing between you and a nasty January. Either way, the pillar guide covers the whole scheme: CIS for subbies in 2026. And if you pay subbies as well as being one, Trade PA tracks each subcontractor at the status you have verified and set, 20%, 30% or gross, and builds the statements from the payments you log.