Gross Payment Status and CIS – What You Need to Know

Understanding CIS and Gross Payment Status with Black & White Accounting

If you work in the UK construction industry, you’ve likely heard of the Construction Industry Scheme (CIS) and Gross Payment Status (GPS). But what do they really mean for your business, and how can they impact your cash flow, tax obligations, and overall financial health?

At Black & White Accounting, we help construction professionals navigate the complexities of tax, ensuring they make informed decisions that benefit their business. In this blog, we’ll break down the essentials of CIS and Gross Payment Status, including who it applies to, the pros and cons, and how to apply.

What is the Construction Industry Scheme (CIS)?

CIS is a special tax scheme for construction contractors and subcontractors, designed to ensure tax compliance and prevent underpayment. Under CIS:

• Contractors must deduct 20% tax (or 30% if the subcontractor is not registered for CIS) from payments made to subcontractors and pass this directly to HMRC.
• Subcontractors receive payments with tax deducted at source, which is then offset against their tax and National Insurance liabilities.

While CIS ensures tax compliance, it also means subcontractors receive payments with tax already deducted, potentially affecting their cash flow. This is where Gross Payment Status (GPS) comes in.

What is Gross Payment Status (GPS)?

Gross Payment Status allows subcontractors to receive full payments from contractors without any tax deductions at source. Instead of having CIS deductions taken upfront, subcontractors are responsible for calculating and paying their tax at the end of the financial year.

This can be a game-changer for cash flow, particularly for businesses that rely on steady income to cover expenses such as wages, materials, and equipment.

Who Can Apply for Gross Payment Status?

GPS is not automatic—subcontractors must apply for it and meet HMRC’s strict eligibility criteria. To qualify, subcontractors must:

1. Be registered for CIS.
2. Prove a track record of tax compliance, including timely filing and payment of tax, National Insurance, and VAT.
3. Meet the business turnover threshold, currently requiring:
   • £30,000 turnover for sole traders.
   • £30,000 per partner in partnerships.
   • £100,000 turnover for limited companies.
4. Be running a business in the UK that carries out construction work.

If a business meets these requirements, it can apply for Gross Payment Status through HMRC, but regular reviews ensure continued compliance.

Advantages of Gross Payment Status

Applying for GPS can offer significant benefits, including:

✅ Improved Cash Flow – Receive full payments without upfront tax deductions, giving greater control over finances. ✅ Greater Financial Flexibility – Funds can be reinvested immediately in the business, helping with growth and expansion. ✅ Increased Credibility – Having GPS can enhance business reputation, making you more attractive to contractors. ✅ Potential for Tax Efficiency – Subcontractors can manage tax obligations more strategically, optimising deductible expenses before making tax payments.

Disadvantages of Gross Payment Status

While GPS can be advantageous, it’s not without its challenges:

⚠️ Tax Responsibility – Subcontractors must set aside enough funds to cover tax bills, as payments will not have tax deducted at source. ⚠️ Stricter Compliance Requirements – HMRC monitors businesses with GPS closely, and failure to meet compliance standards can lead to removal from the scheme. ⚠️ Potential Large Tax Bills – Without careful planning, subcontractors could face significant end-of-year tax payments.

For those who struggle with budgeting for tax, GPS may not always be the best option.

How to Apply for Gross Payment Status

Applying for GPS is straightforward but requires careful attention to compliance. Here’s how:

1. Register for CIS – You must be registered as a subcontractor under CIS before applying for GPS.
2. Check Eligibility – Ensure your tax history is clean, with all returns and payments up to date.
3. Apply Through HMRC – Applications can be made online or via phone.
4. Pass HMRC’s Review – HMRC will assess your tax record and business turnover before granting GPS.
5. Maintain Compliance – If granted, ongoing compliance with tax obligations is essential to keep GPS status.

How Black & White Accounting Can Help

Navigating CIS and Gross Payment Status can be challenging, but Black & White Accounting makes it simple. Our expert team can:

• Assess Your Eligibility for GPS – We evaluate whether your business meets HMRC’s criteria and advise on improving compliance if needed.
• Help with Applications – We manage the entire GPS application process, ensuring it’s done correctly and efficiently.
• Optimise Your Tax Strategy – With GPS, proper tax planning is essential—we help you manage cash flow and set aside the right amount for tax bills.
• Keep You Compliant – Ongoing support ensures you meet HMRC’s strict requirements, avoiding penalties or GPS removal.

Final Thoughts

For subcontractors in the construction industry, Gross Payment Status offers a way to boost cash flow, improve financial flexibility, and take control of tax obligations. However, it comes with responsibilities and risks that require expert financial management.

At Black & White Accounting, we take the guesswork out of CIS and GPS, ensuring you get the most out of your earnings while staying compliant. Get in touch today and let’s build your business on solid financial ground!