What is CIS Gross Payment Status?

Under the Construction Industry Scheme, achieving gross payment status means you’ll receive payments without the standard 20% tax deduction.

This gives CIS subcontractors immediate access to their full earnings and makes them responsible for paying tax directly to HMRC.

For subcontractors this arrangement can result in better cash flow management and can lead to more accurate tax calculations.

To qualify for gross payment status, your business must meet three key tests:

1. the turnover test (minimum annual turnover requirements),
2. the compliance test (demonstrating good tax compliance history),
3. and the business test (proving you carry out construction work and maintain a UK bank account).

Remember, the other alternatives are to voluntarily register for CIS and have 20% deducted and sent to the tax office by your contractor, or to stay unregistered and lose 30% straight to HMRC.

Subcontractors need to fully understand this important tax status. Careful consideration needs to be given to the eligibility requirements, application process, and long-term implications.

Am I eligible for CIS gross payment status?

HMRC has a strict set of eligibility criteria to meet in order to get gross payment status.

There are a series of tests that subcontractors can apply to thier business to see if gross payment status can be granted.

• Turnover Test: Do you hit the turnover target? This applies to your last 12 months trading, minus materials and VAT. It has variables for the different business structures.

A sole trader must have £30,000 turnover.

A limited company must have either £100,000 turnover for the entire business or £30,000 for each director.

A partnership must have £30,000 for each partner, or £100,000 in total for the partnership as a whole.

• Compliance Test: Are all your tax affairs completely in order?

In the 12 months prior to your application, all your tax returns must have been in on time.

Every single tax and NICs liability paid by HMRC’s deadline without exception.

You have HMRC compliant accounts and business records.

• Business Test: The easiest one to answer and prove. Does your business do construction work in the UK and have a UK bank account?

These are the broad outlines for each test that you need to pass and there is more fine detail to delve into, preferably with a CIS tax expert or HMRC directly.

But if you consider that the evidence is generally just your usual business records and you can confidently answer “yes” to each of the three questions above, it is definitely worth further investigation.

How to apply for gross payment status

You can apply for gross payment status through your HMRC online account or by completing form CIS305 for limited companies only.

The online application process is found in the sub section called ‘Construction Industry Scheme – Subcontractors’ and is in the ‘Other Services’ tab.

You’ll need details about your business turnover, tax compliance history, and construction work activities.

You’ll need your UTR number, National Insurance number, and recent financial information. HMRC usually processes applications within 60 days, though complex cases may take longer.

Ensure all information is accurate, as incorrect details can delay approval or result in rejection.

HMRC has a CIS number helpline 0300 200 3210 if you need support with your application.

You will need basic details when you make any enquiry (your UTR, or national insurance number) for security purposes.

What documentation do I need to apply for gross payment status?

You’ll need recent financial statements or accounts showing your turnover figures, evidence of tax compliance including submitted returns and payment records, and details of your construction work activities.

Your UTR number, national Insurance number, and business bank account details are essential.

If you’re a company or partnership, you’ll need additional corporate documentation.

Having your most recent tax calculations and any correspondence with HMRC readily available can speed up the application process significantly.

How long does it take to get CIS gross payment status approved?

It’s reported that HMRC typically processes CIS gross payment status applications within around 60 days from submission.

The timeline can vary depending on the complexity of your application and whether additional information is required.

Simple applications with clear documentation often receive faster processing, while those requiring further verification may take the full 60 days or longer.

During peak periods, processing times may extend slightly.

You can check your application status through your HMRC online account or by contacting their CIS helpline directly.

Can I apply for gross payment status if I’m a new business?

New businesses typically cannot qualify immediately because the turnover test requires 12 months of trading history.

You need to demonstrate consistent revenue levels over this period before applying.

You can prepare for future application by maintaining excellent tax compliance from day one and ensuring construction work forms a substantial part of your business activities.

Some new CIS subcontractor businesses with exceptional circumstances or significant backing may receive consideration, but standard applications require the full trading history.

Do I need CIS gross payment status to claim tax refunds?

You don’t need gross payment status to claim CIS tax refunds, but it can make the process more predictable.

Without gross status, you might overpay tax through automatic deductions and need to claim refunds later.

With gross status, you calculate and pay your actual tax liability, reducing the likelihood of overpayments.

If you do overpay while on gross status, you can still claim refunds through the normal HMRC processes.

How do I pay tax when I have gross payment status?

Instead of the monthly deduction, you pay your tax bill at the end of the financial year either through your self assessment tax return if you’re a partnership or sole trader, or corporation tax return, if you are a limited company.

What are the benefits of gross payment status?

Cash flow straight into your business, is the obvious benefit of getting gross payment status.

There is also some kudos of having HMRC’s trust in this way. This gives an added reliability factor to your reputation for future potential deals.

Business is often seen as steady, if you are given responsibility to pay your own monthly income tax and NIC’s bill.

For contractors, at a very practical level, it saves them the constant administration of tallying up your tax liability and having to communicate that to HMRC correctly.

If you have gross payment status, you deal with all this yourself and this minimises the work for your contractor.

Are there any downsides to having CIS gross payment status?

The main responsibility for a subcontractor is ensuring timely tax payments without automatic deductions as a safety net.

If you struggle with financial discipline or cash flow management, you might find it challenging to set aside money for tax payments.

Losing gross status due to HMRC compliance failures can damage your professional reputation with contractors.

Some businesses also find the application process demanding, requiring detailed financial documentation and ongoing compliance monitoring.

Frequently Asked Questions About CIS Gross Payment Status

What are common mistakes when applying for CIS gross status?
Common mistakes include providing incomplete financial information, failing to demonstrate sufficient turnover for your business type, not maintaining proper compliance records, and applying too early in your business lifecycle.

Ensure you meet all eligibility criteria before applying and maintain detailed records of your construction work and tax compliance.

How does gross payment status impact my relationship with contractors?

Contractors can prefer working with subcontractors who have gross payment status because it indicates financial reliability and tax compliance.

This preference can lead to better payment terms, more work opportunities, and stronger business relationships.

Contractors also benefit because they don’t need to handle tax deductions for gross status subcontractors, simplifying their own administrative processes.

Contractors can view gross status as a mark of professionalism that distinguishes serious businesses from less established operators.

How can I check if my CIS gross payment status application was successful?

You can monitor your application status through your HMRC online services account, where updates appear as your application progresses.

HMRC also sends confirmation letters to your registered address once decisions are made.

If approved, you’ll receive a gross payment status certificate that you should share with contractors.

You can also call the CIS helpline on 0300 200 3210 for status updates. Remember that contractors can verify your status independently through HMRC’s online verification system.

How often does HMRC review CIS gross payment status?
HMRC conducts annual reviews of all gross payment status holders, typically around the anniversary of your approval.

They assess your continued compliance, business turnover, and any changes in circumstances.

Maintaining excellent records and timely tax submissions is essential for retaining your status during these reviews.

Professional support: When to seek expert guidance for CIS gross payment matters

Complex CIS situations often benefit from professional tax expertise, particularly during application processes or compliance challenges.

Tax professionals familiar with construction industry requirements can identify optimization opportunities and potential issues before they become problems.

Consider professional support if your business structure is complex, you’ve experienced previous compliance issues, or you’re uncertain about eligibility requirements.

The investment in expert guidance often pays dividends through successful applications, maintained compliance, and optimised tax strategies tailored to your specific circumstances.