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by

Björgvin Vigfússon

Prospective Receipts (CIS): The Plain-English Guide for Developers & Specialist Subs (UK 2025/26)

Who this is for: UK property developers, main contractors and specialist subcontractors who are close to CIS Gross Payment Status (GPS) but don’t yet have 12 months of “net construction turnover” e.g., newly-incorporated SPVs, scale-ups, or JVs with live contracts.
→ Quick route-check: GPS Readiness Check

GPS Readiness Check (free)

Find out in 10 minutes if Prospective Receipts can get you to GPS sooner. We’ll flag gaps against the business, turnover, and compliance tests and quantify the cashflow upside.
→ Start now: Run the GPS Readiness Check
→ Prefer a chat? Book a 20-minute planning call

Quick definition

Prospective Receipts is an HMRC-recognised way for companies and partnerships (not sole traders) to pass the CIS turnover test for Gross Payment Status using credible future income (signed contracts and WIP) rather than only the last 12 months.

In practice, HMRC expects to see that you have:

  • Relevant payments already earned ≥ £30,000 (i.e., net construction turnover already earned), and
  • Signed construction contracts whose combined value exceeds £100,000.

Translation: if you’re new but already earning on live jobs and hold six-figure, signed contracts, you may qualify for GPS now you don’t always have to wait a full 12 months.
→ Deep dive: How to qualify for (and keep) CIS Gross Payment Status in 2025/26

Where Prospective Receipts sits among the CIS turnover tests

To gain GPS you must pass the turnover test (plus the business and compliance tests). You can meet the turnover test via:

  • Standard test: £30,000 net construction turnover per relevant person in the 12 months before applying.
  • Alternative test: £100,000 net construction turnover for the company/partnership in that 12-month period.
  • Prospective Receipts: forward-looking evidence based on WIP already earned and signed contracts.
  • Other routes: transferred, inherited, or incidental receipts (niche scenarios).

Net construction turnover means construction income excluding VAT and the cost of materials. HMRC usually measures the 12 months prior to the application date; Prospective Receipts relies on credible forward evidence at the time you apply.
→ Get your invoicing right first: CIS invoice anatomy: labour vs materials (with worked examples)

What HMRC expects to see (build your “Prospective Receipts pack”)

Treat this like a lender pack: neat, numbered, cross-referenced. HMRC can run post-acceptance checks.

  1. Contracts & valuations
    Executed JCT/NEC contracts (or signed POs/LOAs) with values, scope and dates, plus the latest interim applications/valuations that tie to WIP.
    → If you’re also the payer, sanity-check CIS operations: Deemed contractor rule explained
  2. WIP & invoices
    A WIP schedule (date, site, stage, value earned, not just billed). Invoices must show a defendable labour vs materials split.
    → Worked examples you can copy: CIS invoice anatomy
  3. Cashflow logic
    Site programme and billing milestones, plus a short cashflow bridge quantifying the GPS benefit (see example below). If the VAT Domestic Reverse Charge applies, align your wording and tax points.
    → Explainer with scenarios: CIS vs VAT Domestic Reverse Charge
  4. Compliance hygiene
    Evidence for the business test (e.g., UK bank, actively trading) and the compliance test, which from 6 April 2024 includes VAT returns and payments.
    → Build the 5th/19th/22nd cadence into ops: Payroll Services UK
    → Cost planning for people: NIC, PAYE & Pension Costs (UK 2025/26)

Prefer to do this inside software (Xero/QuickBooks/Sage/FreeAgent and others) with fewer moving parts?
→ Step-by-step: CIS returns & statements in Xero/QuickBooks/Sage/FreeAgent and more

The 2024 change that trips people up

From 6 April 2024, HMRC added VAT compliance (returns and payments) to the statutory GPS compliance test both for granting and keeping GPS. Minor timing slips can be overlooked, but serious failures can block or revoke GPS. Build VAT controls into your monthly calendar.
→ More detail: CIS penalties & appeals (and how to protect or reinstate GPS)

Worked example: why Prospective Receipts can be worth six figures to cashflow

Scenario: A newly-formed specialist subcontractor (Ltd company) has:

  • WIP earned to date: £35,000 (net of materials/VAT)
  • Two signed contracts totalling £650,000 over the next 9 months

Without GPS: Main contractors deduct 20% CIS on labour. If labour is ~60% of £650k, that’s £390,000 subject to CIS → £78,000 withheld across the year. You eventually reclaim, but working capital shrinks now (while PAYE/NIC, VAT and suppliers still need paying). Deductions apply after materials are excluded.
→ Stop over-deducting: CIS invoice anatomy

With GPS via Prospective Receipts: You’re paid gross; no CIS withheld. You keep that £78,000 inside the business to fund payroll, plant, retentions and supplier terms.
→ Step-by-step qualification: How to qualify for (and keep) CIS Gross Payment Status in 2025/26

Common reasons Prospective Receipts fails (and how to fix them)

  1. No signed contracts
    HMRC wants executed agreements (or binding POs/LOAs), not “preferred bidder”.
    → Fix it fast: Deemed contractor rule explained (know when you must run CIS yourself)
  2. Invoices not CIS-defendable
    Muddled labour vs materials undermines credibility.
    → Use our structure & templates: CIS invoice anatomy
  3. Compliance gaps
    Late VAT returns/payments risk refusal or later withdrawal.
    → One-stop ops: Payroll Services UK
    → Numbers you need to budget: NIC, PAYE & Pension Costs (UK 2025/26)
  4. Director/partner headcount vs turnover
    If the Standard test doesn’t work (e.g., multiple directors), model the Alternative £100k test or Prospective Receipts.
    → Which route is strongest? GPS guide
  5. Can’t evidence WIP
    HMRC expects turnover earned, even if not yet billed. Keep site diaries, signed timesheets, valuations and a WIP reconciliation tied to contracts.
    → Prefer fewer moving parts? CIS inside software — CIS returns & statements in Xero/QuickBooks/Sage

How Prospective Receipts fits with the rest of CIS

Prefer to do this inside software (Xero/QuickBooks/Sage) with fewer moving parts?
→ Step-by-step: CIS returns & statements in Xero/QuickBooks/Sage

Penalties for late returns: £100 at 1 day late; £200 at 2 months; then £300 or 5% of CIS deductions at 6 and 12 months (whichever is higher). Interest/penalties also apply for late payment.
→ More detail: CIS penalties & appeals (and how to protect or reinstate GPS)

Common mistakes that cost developers money

  1. Treating CIS as an “employment status” decision. CIS is not a status test. You still need to decide if someone is an employee for tax using HMRC’s CEST guidance/tool, getting this wrong risks PAYE/NIC liabilities.
    → Clarifier: CIS isn’t employment status: getting PAYE vs subcontractor right
    → Also see: NIC, PAYE & Pension Costs (UK 2025/26)
  2. Over-deducting by misclassifying materials/plant. You must exclude VAT, materials, plant hire and certain consumables before applying the rate. Insist on itemised invoices and evidence of material costs.
    → Worked examples: CIS invoice anatomy: labour vs materials
  3. Missing the 19th / 22nd routine. The CIS month closes on the 5th; returns and statements by the 19th; payments by the 22nd if electronic. Build it into your payroll cycle.
    → One-stop ops: Payroll Services UK
  4. Ignoring the VAT Domestic Reverse Charge. Many construction supplies are reverse-charged, no VAT charged by the subcontractor, and you account for VAT instead. This interacts with CIS and the invoice maths.
    → Explainer: CIS vs VAT Domestic Reverse Charge
  5. Getting caught as a “deemed contractor”. Monitor rolling 12-month construction spend; if it exceeds £3 million, you must operate CIS as a contractor.
    → Deep dive: Deemed contractor rule explained

Running CIS smoothly in your software stack
You can run CIS through HMRC’s online service or CIS-enabled payroll/accounting software: verify subcontractors, calculate deductions correctly, file the monthly return and issue statements all in one workflow.
→ Step-by-step: CIS returns & statements in Xero/QuickBooks/Sage

Free resource: Grab our CIS setup checklist for developers (PDF) to brief your site manager and bookkeeper.
→ Download: CIS setup checklist (PDF)

Tip: If cash is tight on live sites, model CIS outflows (the 22nd) alongside PAYE, VAT quarters and supplier terms then tweak drawdowns/stage payments accordingly.
→ Get help: Cashflow Forecasting Services

FAQs (quick answers)

Do property developers have to register for CIS?
Often yes, if you pay subcontractors for construction operations or meet the deemed contractor spend threshold.
→ Learn more: Deemed contractor rule explained

What are the monthly deadlines?
Tax month 6th–5th; 19th for the return and statements; 22nd (electronic) to pay deductions via PAYE.
→ How to do it in software: CIS returns & statements in Xero/QuickBooks/Sage

Is CIS deducted from materials?
No. You exclude VAT, materials, plant hire and certain consumables, then apply the 20%/30% to the labour.
→ See worked examples: CIS invoice anatomy

Does CIS decide if someone is self-employed?
No, use HMRC’s CEST guidance/tool to assess employment status separately from CIS.
→ Clarifier: CIS isn’t employment status

How does Gross Payment Status work?
Qualified subcontractors are paid gross (0% deduction) but must meet business, turnover and compliance tests, now explicitly including VAT compliance from 6 April 2024, and can lose GPS for non-compliance.
→ Guide: Qualify for (and keep) GPS in 2025/26

GOV.UK sources (for reference)