If you invoice under the Construction Industry Scheme (CIS), Gross Payment Status (GPS) is a serious cashflow lever: you’re paid in full and settle your tax via returns, instead of having 20% deductions taken off by contractors (30% if you’re unverified). GOV.UK
New in 2024: HMRC strengthened the GPS compliance test. From 6 April 2024, you must also be compliant for VAT to get and keep GPS, and HMRC can cancel GPS immediately for serious compliance issues or suspected tax fraud. This is on top of the routine “90-day notice” withdrawal used in standard reviews. GOV.UK
Quick definition (plain English)
Gross Payment Status lets approved CIS subcontractors receive payments without CIS deductions, provided they meet HMRC’s business, turnover, and compliance tests and continue to pass ongoing monitoring. GOV.UK
First time here? Grab our CIS GPS Readiness Check (free mini-audit + evidence pack).
You’ll get: a 10-point PAYE/VAT/CT/ITSA checklist, a turnover worksheet that auto-excludes VAT and materials, an application evidence list, and a 35-day contractor-notice comms template (in case HMRC withdraws GPS).
Why now: VAT is now inside the compliance test and immediate cancellation exists for serious failings — the bar is higher than pre-April 2024. GOV.UK
CTA: Get the CIS GPS Readiness Check (PDF + Sheets)
What changes when you have GPS?
- Without GPS: Contractors withhold 20% (or 30% if you’re unverified) from the labour element of your invoices and pay it to HMRC. GOV.UK
- With GPS: Contractors pay gross (no CIS deduction). You then pay tax via your returns in the normal way. GOV.UK
(Related: if your invoices include materials/plant, see our guide: CIS invoice anatomy: labour vs materials (with worked examples) for the correct split and domestic reverse charge wording.)
The 3 statutory tests to qualify
1) Business test
You must do construction operations (or provide labour) in the UK and run the business through a bank account. GOV.UK
2) Turnover test (last 12 months, exclude VAT and materials)
HMRC checks “net construction turnover” (labour element), ignoring VAT and the cost of materials. Minimums:
- Sole trader: £30,000
- Partnership/Company: £30,000 per partner/director or £100,000 in total (alternative test). GOV.UK
(Tip: Use the turnover worksheet inside the GPS Readiness Check to avoid the classic error of including materials or VAT.)
3) Compliance test (now includes VAT from 6 Apr 2024)
HMRC checks that returns and payments have been on time across PAYE/RTI, ITSA/CTSA and now VAT; failing the test can block approval or trigger withdrawal later. GOV.UK
How to apply (by entity)
- Sole traders: apply online or with CIS302 (notes set out turnover/compliance tests and evidence). GOV.UK+1
- Companies: CIS305 (notes cover the £30k-per-director vs £100k alternative). GOV.UK Assets
- Partnerships: CIS304 (structure-specific requirements and penalties for false info). (HMRC form notes and GOV.UK guidance cover the thresholds and evidence.) GOV.UK
Keeping GPS: monitoring, notice periods, and cancellations
- HMRC runs an automated Tax Treatment Qualification Test (TTQT) shortly after approval (first at 6 months, then annually). Fail the scheduled review and HMRC normally withdraws GPS with 90 days’ notice. GOV.UK+
- Serious compliance failures can now lead to immediate cancellation (no 90-day grace). GOV.UK
- If HMRC cancels GPS, they will notify contractors you worked with in the current or previous two tax years and give them 35 days’ notice to start deductions on payments after the notified date. GOV.UK+
- Re-applying: if GPS is withdrawn, there’s typically a 12-month wait before you can reapply, so staying compliant is cheaper than losing and regaining status. (Summarised in professional guidance referencing HMRC practice.) Carpenter Box
Reality check: Tribunals have upheld withdrawals for older failures discovered in later checks e.g., RMF Construction lost GPS years after the original late filings. Don’t assume “that was ages ago” is a defence. www.rossmartin.co.uk
Worked cashflow comparison (GPS vs standard CIS deductions)
Scenario: Over a quarter you raise £200,000 net invoices (£40,000 VAT). Of the net amount, £50,000 is materials, £150,000 is labour.
- Without GPS: CIS deduction = 20% × £150,000 = £30,000 withheld by contractors. Cash-in this quarter = £170,000 net + VAT paid to you (subject to DRC rules where applicable).
- With GPS: £200,000 received (no CIS deduction).
Immediate cashflow swing: +£30,000 in-quarter.
If you routinely finance that shortfall on a 10% overdraft for ~45 days, the interest avoided is roughly £370 (30,000 × 10% × 45/365). The bigger benefit, though, is operational: fewer “CIS-holes” in working capital, easier supplier terms, and better lender optics.
(Cross-link: for clean labour/material splits and correct reverse-charge wording, see CIS invoice anatomy: labour vs materials and CIS vs VAT Domestic Reverse Charge: when both apply.)
Common reasons people fail GPS (or lose it later)
- Turnover mis-calculated (materials/VAT accidentally included). HMRC’s form notes are clear that net construction turnover excludes both. GOV.UK Assets
- PAYE/RTI or VAT slippage (late returns or payments). VAT now explicitly sits in the compliance test. GOV.UK
- Bank account/“business test” gaps (e.g., not run through a bank account). GOV.UK
- Ignoring TTQT communications (leading to avoidable withdrawal on the next review). GOV.UK
Deemed contractors & GPS (for developers and property groups)
If you’re a deemed contractor (your annual spend on construction operations averages £3m over a rolling 3-year period), you have contractor duties even if construction isn’t your core trade — which affects verification and deductions if your subs don’t have GPS. (See our explainer: Deemed contractor rule explained: calculating the £3m spend and when it bites.)
(General CIS contractor guidance and deduction rules are set out in CIS340.) GOV.UK
Software & admin: doing CIS right every month
- Monthly CIS300 returns and Payment & Deduction Statements are still required — regardless of your subs’ GPS. (Guide and schedules in CIS340.) GOV.UK
- See our practical walkthroughs for CIS returns & statements in Xero/QuickBooks/Sage to keep audit trails clean and GPS-safe.
Penalties, appeals, and reinstating GPS
- HMRC penalties apply for incorrect CIS operation and false registration details; HMRC can also withdraw GPS on failed compliance. GOV.UK
- Appeals: You can appeal refusal or withdrawal decisions; outcomes depend on your compliance history, recent cases show tribunals can uphold HMRC where failures are established. www.rossmartin.co.uk
(Deep dive: CIS penalties & appeals (and how to protect or reinstate GPS).)
FAQs (short, practical)
How long does GPS approval take?
It varies with HMRC checks; ensure your returns/payments (PAYE, VAT, ITSA/CTSA) are up-to-date and your turnover evidence is ready to avoid back-and-forth. (Tests and process explained on GOV.UK and in form notes.) GOV.UK
What proof do I need for the turnover test?
Invoices/ledgers that clearly separate labour from materials, plus bank statements. HMRC tests net construction turnover (exclude VAT/materials). GOV.UK Assets
If GPS is withdrawn, when must contractors start deductions?
HMRC notifies contractors you worked with in the current or previous two tax years; they get 35 days’ notice before they must start deducting on payments after the notified date. GOV.UK
What’s the difference between the 90-day notice and immediate cancellation?
Fail a scheduled TTQT review → 90 days’ notice; serious failures/suspected fraud → immediate cancellation. GOV.UK
What to do next
- Download the CIS GPS Readiness Check (PDF + Sheets) — make sure you truly pass Business/Turnover/Compliance (now including VAT) before you apply. GOV.UK
- Fix your invoice split & DRC wording → CIS invoice anatomy
- If you’re a developer or group: sanity-check the Deemed contractor rule
- Implement clean monthly admin → CIS returns & statements in Xero/QuickBooks/Sage
- For end-to-end help (PAYE/RTI, VAT timing, CIS), see Payroll Services UK and NIC, PAYE & Pension Costs (UK 2025/26) — both critical to the GPS compliance test.
Prefer a walkthrough? Book a 20-minute planning call and we’ll review your GPS position, turnover evidence, and compliance timeline.