The construction industry is governed by a regulated tax framework designed to maintain compliance across the sector. HMRC introduced the Construction Industry Scheme (CIS) to reduce tax avoidance and improve compliance across the industry. Under CIS, contractors must deduct tax at the source before paying subcontractors. While this protects HMRC’s revenue, the deductions often mean subcontractors are paying tax upfront.
Although many can reclaim some of this tax later through their self-assessment return, the immediate reduction in income can create significant cash-flow pressure, especially for smaller businesses or sole traders who rely on the full value of their invoices to cover labour, materials, and daily operating costs.
The Gross Payment Status (GPS) is an attractive option for subcontractors who meet HMRC’s eligibility requirements. With Gross Payment Status, subcontractors receive the full value of every invoice without any CIS deductions, allowing them to pay their tax at a later date through Self Assessment or Corporation Tax. This arrangement can significantly improve cash flow, strengthen financial stability, and free up capital for business growth.
At The Infinity Group, we regularly support both contractors and subcontractors with all aspects of CIS, including registration, GPS applications, and compliance checks. This guide explains how CIS normally works, what GPS means, who is eligible, how to apply, the advantages of obtaining GPS, and the responsibilities that come with it.
How Payments Normally Work Under CIS
Under the Construction Industry Scheme, a portion of a subcontractor’s payment should be deducted by the contractor before releasing funds. This amount is transferred directly to HMRC and treated as an advance towards the subcontractor’s annual tax and National Insurance liabilities.
- Registered subcontractors: 20% deduction – Standard Rate
- Unregistered subcontractors: 30% deduction – Higher Rate
The remaining amount is then paid to the subcontractor.
What Gross Payment Status (GPS) Means
Gross Payment Status allows subcontractors to be paid the full value of their invoices, with no CIS deductions taken at the source. Instead of contractors withholding 20% or 30% tax, the subcontractor receives the entire payment and later pays the correct tax through their self-assessment or corporation tax return.
For many businesses, this represents a significant change. Receiving full payments improves cash flow, strengthens relationships with suppliers, and frees up capital for investment and growth. GPS also signals trust: HMRC only grants it to businesses that have demonstrated strong financial management and consistent compliance with tax obligations.
However, this benefit comes with responsibility. Subcontractors must maintain strict tax compliance and stay fully up to date with filings and payments. Any failure to comply can result in HMRC removing the GPS and reverting the business back to Net status.
Difference Between Net Payment Status and Gross Payment Status
The key difference between the two systems is who is responsible for paying the tax to HMRC.
- Under Net status: Contractors deduct 20–30% from subcontractor payments and send this directly to HMRC.
- Under Gross Payment Status, subcontractors are paid the full amount of invoices and they must pay HMRC themselves at the right time.
For subcontractors, this is a significant shift. Net status reduce immediate cash flow, whereas GPS provides greater control over money and improves liquidity.
For contractors, the difference is minimal; they simply pay the subcontractor’s invoice in full rather than after deductions.
How Payments Work Under Gross Payment Status
Once a subcontractor has been granted Gross Payment Status, the payment process becomes straightforward. They issue invoices as normal, and contractors pay the full amount without making any CIS deductions
It is important to note that GPS does not reduce the amount of tax owed. The tax liability remains the same. The only change is when the tax is paid and who is responsible for paying it.
Eligibility: Who Can Apply for GPS
Not every subcontractor will qualify for Gross Payment Status. HMRC applies three strict tests to decide whether a business is eligible:
Business Test
The subcontractor must be carrying out work that falls within the scope of the Construction Industry Scheme.
This includes activities such as building, plumbing, electrical work, roofing, decorating, demolition, and other construction-related operations.
Businesses outside these categories cannot qualify for GPS.
Turnover Test
The business must meet HMRC’s minimum construction turnover requirements. Turnover must:
- exclude VAT, and
- exclude the cost of materials
The thresholds differ depending on the business structure:
Sole Traders
Must have at least £30,000 in construction turnover.
Partnerships
£30,000 for each partner
or at least £100,000 total across the whole partnership.
Limited Companies
HMRC applies one of two:
• £30,000 for each director who is actively involved in construction work
or
• at least £100,000 total construction turnover for the company.
New Businesses
New subcontractors do not need to meet the turnover test for their first 12 months.
However, they must still pass the Business and Compliance Tests.
Compliance Test
HMRC will assess the business’s tax history to confirm it has a strong record of compliance. This includes:
- Filing all tax returns on time
- Paying all tax liabilities promptly
- Having no outstanding arrears, penalties, or compliance breaches
Late submissions or late payments will almost always result in the application being refused.
Who Can Apply
Both sole traders and limited companies can apply for Gross Payment Status if they meet HMRC’s requirements.
New businesses are also eligible; although they are exempt from the turnover test during their first 12 months, they must still demonstrate reliability and full compliance from the outset.
How to Apply
Applying for Gross Payment Status is a simple process, but HMRC will only approve businesses that can clearly demonstrate they meet the required standards. The steps are as follows:
- Register for the Construction Industry Scheme (CIS)
Before applying for GPS, the business must be registered as a subcontractor under CIS. This can be done online, by phone, or through your HMRC business tax account. - Request Gross Payment Status
You can apply for GPS at the time of CIS registration or later through the “Manage CIS” section of your HMRC online services account. - Provide Information When HMRC Requests It
HMRC may ask for evidence to confirm that your business meets the:
• Business Test (carrying out CIS-covered construction work)
• Turnover Test (unless you are a new business)
• Compliance Test (timely tax returns and payments)
You may be asked to provide details of turnover, business activities, and tax compliance history. - Wait for HMRC’s Decision
HMRC will review your application and issue a written decision. If approved, your business will begin receiving payments without CIS deductions.
If Your Application Is Refused
HMRC will explain the reason for refusal. You can appeal the decision or reapply later once any issues such as late submissions or unpaid tax have been resolved.
Annual Reviews
HMRC will carry out yearly reviews to ensure your business continues to meet the GPS criteria. Failure to maintain compliance may result in GPS being withdrawn.
Advantages of Gross Payment Status
Gross Payment Status offers several valuable benefits for subcontractors, beyond simply avoiding CIS deductions at the source:
- Improved Cash Flow
Subcontractors receive the full amount of each invoice without deductions. This increases available cash, reduces reliance on overdrafts or loans, and supports day-to-day operations more effectively. - Greater Flexibility in Tax Planning
Because tax is paid later through self-assessment or corporation tax, businesses can manage their funds strategically, setting aside money when appropriate and planning their finances with more control. - Stronger Supplier Relationships
With improved cash flow, subcontractors can pay suppliers on time, building trust and often securing better payment terms or discounts. - Enhanced Growth Potential
More working capital means subcontractors can confidently take on larger projects, invest in equipment, hire additional staff, or expand their services. - Professional Credibility
GPS signals to contractors, clients, and suppliers that HMRC regards the business as financially responsible and compliant. This can improve reputation and competitiveness within the construction industry.
At The Infinity Group, many of our clients have benefited from GPS through improved cash flow, stronger supply chains, and increased capacity to grow their businesses.
Responsibilities and Risks
Gross Payment Status offers significant advantages, but it also comes with important responsibilities. A business must maintain high standards of compliance at all times.
Responsibilities
- File tax returns correctly and in time.
- Pay all the taxes, including the National Insurance, by the due dates.
- Maintain proper financial records.
- Inform HMRC of any changes to the business structure or trading status
Risks
- Loss of GPS due to non-compliance.
- Cash flow mismanagement
Since no deductions are taken at source, businesses must set aside enough money to pay future tax bills. Poor planning can lead to unexpected tax debts. - Increased scrutiny from HMRC
GPS holders are subject to ongoing compliance checks, meaning any errors or issues are likely to be identified quickly.
GPS provides freedom, but it requires discipline. Subcontractors should have strong bookkeeping and cash management systems in place before applying.
How Infinity Can Help
Gross Payment Status can be a real advantage for subcontractors, especially those trying to keep their cash flow steady while managing the day-to-day pressures of construction work. What many businesses discover, however, is that the rules around CIS and GPS can feel confusing when handling them alone. That is where having the right guidance makes all the difference.
At The Infinity Group, we work alongside subcontractors and contractors throughout the entire CIS process. We help businesses register correctly, prepare the documents HMRC expects, and organise their figures in a way that clearly reflects the work they do. When it comes to GPS applications or annual reviews, we make sure your tax returns, turnover records, and financial information are arranged properly so you remain in a strong position throughout the year.
Our support isn’t limited to paperwork. Many subcontractors simply need someone to help them set up better financial routines, manage incoming and outgoing payments more confidently, or keep track of tax deadlines without stress. By walking you through what HMRC typically checks and how to stay ahead of your obligations, we reduce the chances of unexpected problems or compliance issues disrupting your work.
Above all, we aim to make the compliance side of your business feel manageable. With steady guidance and practical experience in the construction sector, The Infinity Group helps subcontractors stay financially organised, confident in their responsibilities, and better prepared for long-term growth under the Construction Industry Scheme.
Frequently Asked Questions
Can I reapply if my Gross Payment Status application is refused?
Yes. Once issues such as arrears or late filings are resolved, you can reapply.
How often does HMRC review GPS?
Reviews are carried out annually to ensure compliance.
Does Gross Payment Status reduce my tax bill?
No. It only changes when tax is collected, not the total amount due.
What happens if I fail to manage my tax under GPS?
HMRC can revoke the status and You will then return to the Net status , where contractors deduct 20–30% tax at source.
Is GPS right for every subcontractor?
GPS is most effective for businesses with stable turnover and strong cash flow management. Smaller subcontractors or new businesses should consider whether they can reliably set aside funds to cover future tax bills before applying.