Why Apply for CIS Gross Payment Status?

Obtaining CIS gross payment status brings a number of benefits:

• Better cash flow: you receive the full amount from the contractor rather than having tax withheld.

• Business credibility: being granted gross payment status signals to contractors and clients that your tax affairs are well managed.

• Administrative simplicity for the paying party: once you have the status, contractors don’t need to deduct tax for you under CIS.
  However, it also brings increased responsibility: you must manage your own tax liabilities and ensure full compliance to retain the status.

The Three Key Tests for CIS Gross Payment Status

To be granted CIS gross payment status you must pass three main tests. These remain broadly unchanged, but there are important updates for 2025/26.

1. Business Test

Your business must carry out construction operations (or provide labour for such work) in the UK, and have a dedicated business bank account.

HMRC will verify that you genuinely operate in the construction sector and maintain the bank account details you supply.

2. Turnover Test

Your turnover (excluding VAT and materials) in the preceding 12 months must meet the threshold.

For sole traders that threshold remains £30,000.

For partnerships/companies, it is at least £30,000 per relevant person (director/partner) or a minimum of £100,000 for the whole entity (depending on structure).

3. Compliance Test (Updated for 2025/26)

This is where recent changes impact you if you’re applying or already hold CIS gross payment status.

From 6 April 2024, HMRC added VAT obligations to the compliance test.

This means your VAT returns and payments must be compliant if you either hold or apply for CIS gross payment status.

Additionally, for 2025/26 HMRC is placing more emphasis on real-time data, more frequent reviews (not just annual) and immediate cancellation grounds where HMRC has reasonable grounds to suspect fraud involving VAT, Income Tax, Corporation Tax or PAYE.

In short, you must:

• Have filed all relevant returns (Income Tax/Self Assessment, Corporation Tax (if applicable), CIS monthly returns) on time.

• Have paid all due tax, National Insurance, CIS deductions and VAT (if applicable) by the due date.

• Ensure no outstanding returns or payments exist at the time of your application (or review).
  Failure in any of these areas can lead to automatic refusal or withdrawal of your status.

How to Apply for CIS Gross Payment Status

Applying for CIS gross payment status can be done online (or by post, depending on your business structure). The process generally includes:

• Ensuring you are registered as a subcontractor under CIS.

• Confirming you meet the turnover and business tests as above.

• Submitting your application for gross payment status via HMRC’s online services or the relevant form.

• Waiting for HMRC’s review. If approved, your contractor(s) will pay you without CIS deductions. If declined, you’ll be notified of the reasons and can re-apply (usually after a year of full compliance).

When you hold the status you must still comply with all your tax obligations. HMRC will review yearly (or more often) and may withdraw status if compliance lapses.

Key Changes for 2025/26 You Must Know

• The addition of VAT compliance into the test for CIS gross payment status means that even minor VAT issues can jeopardise your status.

• HMRC is using enhanced data analytics and conducting more frequent reviews in 2025. Holding gross payment status is no longer a “set and forget” position.

• The category of “deemed contractors” has expanded; businesses with over £3 million of construction spending in the past 12 months may be classed as contractors and must operate under CIS—even if they are not a “traditional” builder. Stonebridge+1

• If HMRC has “reasonable grounds” to suspect fraud involving VAT, Income Tax, Corporation Tax or PAYE, they can immediately cancel your CIS gross payment status.

So: maintain rigorous records, file everything on time, monitor VAT, tax and NI payments carefully—and treat your gross payment status as an ongoing responsibility, not a one-off win.

🤝How Trueman Brown Can Help with CIS Gross Payment Status

If you’re looking to apply for or maintain your CIS gross payment status, the team at Trueman Brown can support you every step of the way. We specialise in construction sector tax compliance, and can help you:

• Review whether you meet the business, turnover and compliance tests for CIS gross payment status.

• Ensure your VAT, Corporation Tax, PAYE/NI and CIS obligations are up to date.

• Assist with gathering the documentation and completing the application process for her HMRC.

• Set up systems and processes so you stay compliant going forward and reduce the risk of HMRC withdrawing your status mid-year.

If you’d like to talk this through, contact us:
Email: mark@truemanbrown.co.uk
Phone: 01708 397 262

We’ll help you position your business for CIS gross payment status and safeguard your improved cash-flow and compliance credentials.

❓FAQ – CIS Gross Payment Status

Q: What happens if my CIS gross payment status is withdrawn?
A: If HMRC withdraws your CIS gross payment status you revert to deduction at source (typically 20% for registered subcontractors). You’ll usually need at least 12 months of full compliance before re-applying.

Q: Does the turnover test threshold for CIS gross payment status change each year?
A: The main threshold (£30,000 for a sole trader, or £30,000 per director/partner or £100,000 for an entity) remains as per the current guidance.

Q: If I receive gross payment status, do I still have to file returns?
A: Yes. Holding CIS gross payment status doesn’t remove your obligations. You must still file your Self-Assessment (for sole traders/partners) or Corporation Tax (for companies), remit PAYE/NI (if applicable), file VAT and keep up monthly CIS returns where you are a contractor.

Q: My business has a minor VAT error. Will I be refused CIS gross payment status?
A: HMRC’s guidance states they will disregard minor VAT compliance failures. However, since VAT is now part of the compliance test from 6 April 2024, you must correct issues promptly and ensure you demonstrate full compliance.

Q: Can a company apply for CIS gross payment status if it has multiple directors and shareholders?
A: Yes, but you’ll need to meet the turnover test per relevant person and the overall business threshold. For ‘close’ companies (five or fewer directors/shareholders), beneficial owners count as “relevant persons”.

Q: Are the monthly CIS returns deadlines changing?
A: The rule remains that contractors must submit their monthly CIS returns to HMRC and deduct the correct amount from payments unless the subcontractor has gross payment status. The standard online payment deadline remains the 22nd of the following month (19th if paying by post). You must keep scheduling and deadlines in mind.

Q: How often will HMRC review my CIS gross payment status?
A: Traditionally it was an annual review, but HMRC’s 2025/26 enforcement indicates more frequent reviews and real-time monitoring are now common.