What a 0% rate actually means
Ordinarily a contractor deducts 20% from a registered subcontractor and 30% from an unregistered one. The deduction comes off the labour and expenses element of the invoice: materials are taken out of the base before the percentage is applied, so there is no separate materials rate.
With gross payment status the rate is 0%. The contractor pays the invoice in full and you handle the tax yourself at the end of the year like any other sole trader.
The three things HMRC looks at
HMRC's conditions are a compliance record, the nature of the work and a business bank account:
- You have paid tax and National Insurance on time in the past
- Your business does construction work, or provides labour for it, in the UK
- Your business is run through a bank account
| Who you are | Turnover test |
|---|---|
| Sole trader | At least £30,000 |
| Partnership | At least £30,000 per partner, or £100,000 for the whole partnership |
| Limited company | At least £30,000 per director, or £100,000 for the whole company |
| Close company | £30,000 each, where five or fewer people control it |
The turnover test looks at the last 12 months and ignores both VAT and the cost of materials.
How to apply
You apply online or by post, and the form depends on whether you are a sole trader, a partnership or a limited company. The same application registers you for CIS if you are not already registered.
Give HMRC false information and the fine can land on you and on anyone who helped you prepare it.
The annual review, and losing it
HMRC reviews gross payment status every year. A small amount of late payment or late filing is tolerated; a pattern is not.
If HMRC decides to withdraw it you get 90 days' notice, then 30 days from that letter to appeal. Once it is cancelled you must wait a year before you can reapply.
Being on an agreed time to pay arrangement with HMRC does not affect your status.
If you do not have it
The deductions are not money lost. Sole traders and partners record the full invoice amounts as income and the deductions in the CIS deductions field of the Self Assessment return. HMRC works out the tax and National Insurance, takes the deductions off, repays any excess, and any shortfall is payable by 31 January after the end of the tax year.
That is why the statements matter. The money only comes back if the deductions are on record, and the statements are the record.
If you pay subcontractors yourself
Gross payment status is about what is deducted from you. The moment you pay subcontractors, the contractor duties are yours as well, and they run on a monthly clock.
The tax month runs from the 6th to the 5th. You must file a CIS return by the 19th of the following month, and pay HMRC by the 22nd, or the 19th if you pay by post. Every subcontractor you deduct from must get a payment and deduction statement within 14 days of the month end, which is the same 19th.
- From 6 April 2026 a nil return is required again: if you paid nobody, file the nil return or tell HMRC you have stopped using subcontractors, by the 19th
- The full late filing penalty regime is live again: £100 for a return a day late, then £200 at two months, the greater of £300 or 5% at six months and again at twelve, and up to £3,000 or 100% beyond that
- Payments to subcontractors who are local authorities or public bodies are outside CIS from 6 April 2026