What is CIS gross payment status (GPS)?
CIS gross payment status is a scheme for subcontractors in the UK. Under this scheme, contractors will pay you in full, without any deductions. You will be responsible for paying Income Tax, National Insurance, and Corporation Tax (if applicable) when you submit your tax return.
Are you a subcontractor in the UK? Learn how to create a CIS invoice and the invoice requirements for CIS workers.
It is not mandatory to apply for the gross payment status, however, it is the preferred method for most CIS subcontractors. If you decide to apply, you will need to pass some tests from HMRC.
Who is eligible for gross payment status
To qualify for gross payment status, you need to prove to HMRC that you’ve paid your tax and contributions on time in the past and that your business provides construction services in the UK. In addition, you will need bank statements to prove that your business is not “off the books”.
Once you apply, HMRC will check your documents and calculate your turnover (excluding VAT and extra materials). To qualify, your minimum turnover is based on your business structure:
- Sole trader: £30,000
- Partnership: £30,000 for each partner, or £100,000 for the whole partnership
- Company: £30,000 for each director, or £100,000 for the whole company
Make sure that all of the information you submit is correct. You may incur fines if the information is incorrect.
How to apply for CIS gross payment status
You can apply for gross payment status when you apply for the Construction Industry Scheme. If you’re already registered and would like to switch to gross payment status, you can either apply online or by calling the CIS helpline.
To apply online, sign in to your Government Gateway account, or register for an account if you don’t already have one. Under “Your tax account”, select “Other Services”, and choose the “Construction Industry Scheme – Subcontractors” option. The system will walk you through the application process.
Once registered for gross payment status, HMRC will conduct annual reviews of your business to ensure that you still qualify for the scheme. Therefore, it is important that your tax returns are correct and paid on time.
If you are a registered company, HMRC will review the company as a whole rather than its individual directors.
If you fail your annual review, HMRC will cancel your gross payment status and you will therefore need to pay CIS deductions at the source. In this case, you will need to wait one year to reapply for gross payment status.
It is important to report any changes to your business structure or turnover as soon as possible to HMRC.
Tax returns and gross payment status
If you are a sole trader, you will need to declare your payments on your Self Assessment tax return. If you are a registered company, you will need to do so on your Corporation Tax Return.
If your business is VAT registered, your payments are VAT inclusive, however, output VAT will not count towards your turnover.
To learn how invoicing software can help you complete your tax return, read our article: “How Debitoor can help you complete your Self Assessment".