CIS Gross Payment Status: UK Rules and 2026 Fraud Updates
Learn how UK construction subcontractors can qualify for and maintain CIS gross payment status, including turnover tests and critical 2026 anti-fraud updates.
Key takeaways: Qualifying for CIS gross payment status
- Subcontractors must pass three strict statutory tests simultaneously: the Business Test, the Turnover Test, and the Compliance Test.
- The individual net turnover threshold is £30,000, while the partnership or corporate threshold is £100,000.
- Compliance checks now include VAT alongside National Insurance, Income Tax, and Corporation Tax.
- Significant anti-fraud rules taking effect on 6 April 2026 introduce immediate cancellations and a five-year reapplication bar.
- Applications must be filed with HM Revenue and Customs (HMRC) using specific forms matched to your business structure.
How do I qualify for CIS gross payment status?
To qualify for CIS gross payment status under UK tax law, construction subcontractors must simultaneously pass the three statutory tests administered by HM Revenue and Customs (HMRC). These requirements are legislated under Section 64 of the Finance Act 2004 and Regulations 27 to 37 of the Statutory Instrument 2005/2045.
Subcontractors must successfully satisfy the Business Test, the Turnover Test, and the Compliance Test. Failing to meet even a single condition will result in HMRC refusing your application or fully cancelling your existing gross payment status.
What is CIS gross payment status (GPS)?
CIS gross payment status is an official tax status where main contractors pay you 100% of your labour earnings without deducting any tax at source. This provides a substantial cash flow advantage for your business, as no deductions are held back.
Under standard CIS rules, registered subcontractors face a 20% deduction, and unregistered ones face a 30% deduction. When you hold gross status, you receive your payments in full and settle all of your Income Tax, Corporation Tax, and National Insurance contributions at the end of the financial year.
What are the rules for the Business Test?
The Business Test is a straightforward evaluation designed to prove you operate a legitimate trading entity. Below are the statutory rules you must meet to pass this test:
- Your business must carry out construction operations in the UK, or supply labour for UK construction work.
- Your business must operate through a UK bank account.
How does the CIS Gross Payment Status Turnover Test work?
The Turnover Test examines your net CIS turnover over the 12 months directly preceding your application. To calculate this correctly, you must exclude VAT and the direct cost of materials from your total earnings.
| Business Structure | Minimum Net CIS Turnover Requirements |
|---|---|
| Sole Trader | £30,000 minimum net turnover |
| Partnership | £30,000 per partner, or a flat £100,000 for the entire partnership |
| Limited Company | £30,000 per director (and per beneficial shareholder if close-controlled), or £100,000 for the whole company |
According to the official HMRC CIS305 Notes, an exception applies to subsidiary companies. A company wholly owned by a parent company that already holds gross payment status does not need to pass the turnover test.
What are the requirements for the Compliance Test?
The Compliance Test requires your business to have a clean, up-to-date filing and payment record with HMRC. Since 6 April 2024, HMRC consolidated this test further by officially making VAT compliance a core requirement alongside other direct taxes.
HMRC specifically checks that the following tax obligations have been filed and paid on time:
- Income Tax Self Assessment returns and relevant payments.
- Corporation Tax Self Assessment returns and payments.
- Monthly CIS contractor returns.
- PAYE returns and payments for your employees.
- VAT returns and payments (mandatory under the April 2024 reform).
What are the new rules on GPS fraud and cancellations from April 2026?
From 6 April 2026, the legislative measures enacted under the Finance Act 2026 impose strict penalties to combat supply chain evasion. HMRC will have the power to cancel your gross payment status immediately without prior notice if they believe you are linked to evasion.
If HMRC establishes that a business knew, or reasonably should have known, that its transactions were connected to fraudulent tax evasion, its gross payment status will be removed. In addition, the Finance Act 2026 increases the reapplication ban. Subcontractors whose status is cancelled under these anti-fraud grounds must wait five years to reapply, a significant increase from the previous one-year restriction.
How do I apply for gross payment status?
You can apply for gross payment status when you initial register for CIS, or at a later date. Your business must prepare and submit the correct form based on its legal structure.
| Business Type | Required HMRC Form | Submission Method |
|---|---|---|
| Sole Trader | Form CIS302 | Online via Government Gateway or by post |
| Partnership | Form CIS304 | Online via Government Gateway or by post |
| Limited Company | Form CIS305 | Online via Government Gateway or by post |
When submitting your application, you must provide your Unique Taxpayer Reference (UTR), National Insurance number or Company Registration Number, bank account details, and evidence of your qualifying turnover.
How do I keep my gross payment status once I get it?
HMRC runs an automated annual review of all gross payment status holders to verify ongoing compliance. Because losing your status causes immediate 20% deductions on all invoices, maintaining compliance throughout the year is vital.
- File all tax returns, including VAT, PAYE, and Self Assessment, by their official deadlines.
- Pay all tax and National Insurance liabilities on time to avoid triggering automated automated flags.
- Maintain organised business records, separating labour costs, material costs, and VAT charges.
- Perform thorough due diligence on your supply chains to protect your business from connections to fraudulent chains.
What is the turnover threshold for CIS gross payment status?
The turnover threshold is a minimum of £30,000 in net CIS turnover over the past 12 months for individuals, and a minimum of £100,000 for partnerships or limited companies overall.
Can HMRC cancel my gross payment status without warning?
Yes. While standard compliance issues usually trigger a warning, new anti-fraud measures under the Finance Act 2026 allow HMRC to cancel your gross payment status immediately and without warning if you are connected to transaction fraud.
Does VAT compliance affect my CIS gross payment status?
Yes. Since 6 April 2024, VAT compliance is officially reviewed as part of the HMRC compliance test. Missing VAT return deadlines or payments can result in your gross payment status being refused or cancelled.
What happens if my application for GPS is rejected?
If HMRC rejects your application, you will receive a formal notification letter explaining why. You have the right to register an appeal against the decision within 30 days of the date on the notice.
If my GPS is cancelled, how long must I wait to reapply?
For standard compliance failures, you must wait one year. However, for cancellations related to tax evasion or fraud under the Finance Act 2026 rules, you must wait five years before you can reapply.