Gross payment status
Gross payment status means contractors pay you in full, with 0% deducted instead of 20%. You must pass three tests: the business test, the turnover test (£30,000 for a sole trader or £30,000 per partner or director, excluding VAT and materials), and the compliance test — tax and returns filed and paid on time.
For a subcontractor who buys materials, hires plant or pays people, the 20% deducted at source comes out of money already committed. Gross payment status stops that — at the price of a compliance record that has to stay clean.
The three tests
Business
That you genuinely carry out construction work, or supply labour for it, in the UK — and that the business runs through a bank account. Straightforward for anyone actually trading.
Turnover
Measured on net construction turnover: excluding VAT and the cost of materials. That exclusion matters — a business invoicing £45,000 of which £20,000 is materials has £25,000 of relevant turnover, below the£30,000 a sole trader needs.
For partnerships and companies it is £30,000 per partner or director, or£100,000 for the business as a whole under the alternative test.
Compliance
That your tax obligations have been met on time. This is where applications fail, and it is the only test that depends on twelve months of past behaviour rather than on facts about the business today.
If you also pay subcontractors, your monthly CIS returns count towards it too — a missed nil return is a compliance failure even though nothing was owed.
Worth applying, or worth waiting?
Send us your turnover, your cost mix and your filing record. We will tell you whether an application succeeds now or needs a clean quarter first — and whether the cash-flow gain is actually worth the exposure in your case.
Ask on WhatsAppOr send an email
Free assessment first. If there is work to do, you get a fixed quote in writing before anything starts.
The part nobody mentions until it happens
Gross payment status is reviewed, and it can be withdrawn. Before you have it, a late return is a penalty. After you have it, the same late return can cost you the status — and with it the entire cash-flow advantage the business has probably been planning around.
Contractors revert to withholding at 20% immediately, and you reapply from a position that now includes a compliance failure. For businesses at this size the practical answer is usually to put the filing on a schedule someone else is responsible for.
Is it right for you?
The advantage is proportional to your costs. If your invoices are mostly labour and your expenses are modest, the deductions broadly match your eventual bill and the refund arrives each year anyway — the gain is timing, not money. If you buy materials, hire plant or pay a team, 20% is being withheld from money already spent, and the difference is what your working capital is made of.
Either way it does not change what you owe. See how CIS deductions work for why the deduction and the tax bill were never the same number.
Questions people ask
What does gross payment status actually change?
Contractors pay you in full — 0% deducted — instead of withholding 20% of your labour. You then pay your own tax through Self Assessment or corporation tax as normal. Nothing about the amount of tax changes; what changes is who holds the money in the meantime.
What are the turnover thresholds?
Excluding VAT and materials: £30,000 for a sole trader, £30,000 per partner or director, or £100,000 for the business as a whole under the alternative test.
What is the compliance test?
That your tax and National Insurance have been paid on time — including CIS returns if you are also a contractor. It is the test most applications fail, and the only one you can prepare for months in advance by simply filing and paying on time.
Can HMRC take it away?
Yes. The status is reviewed and can be withdrawn if compliance slips. That is the sharp edge: a late return that would have been a modest penalty before becomes the loss of your entire cash-flow advantage, and contractors go back to withholding at 20% while you reapply.
Is it always worth having?
For a subcontractor with materials, plant and workers of their own — usually yes, because the deductions are calculated on money that is already committed elsewhere. For a sole trader with low costs who reliably gets a refund each year, the advantage is smaller and the compliance exposure is real.
How long does an application take?
HMRC assesses the three tests and will look at your record. Applying with a recent late payment or missing return is applying to be refused — the practical sequence is to get twelve clean months behind you first.
Figures are for the tax year shown and change every April. They are general information, not advice — we check the current position for your circumstances before anything is filed.
Reviewed 19 October 2026.
Part of our work on cis and construction — if you want someone to take it off your hands, start with our CIS accountant page.