Last updated: 14 October 2026
Does CIS gross payment status transfer to a sole trader business?
No. CIS gross payment status belongs to the specific business that HMRC approved, whether that is a sole trader, a partnership or a limited company. If you move from a limited company to working as a sole trader, or the other way round, the new business must apply for gross payment status itself and pass HMRC’s tests in its own right.
What gross payment status means
Under the Construction Industry Scheme, contractors deduct 20% from registered subcontractors’ labour payments, or 30% if they are not registered. With gross payment status, you are paid in full, with no deductions, and you pay your tax through Self Assessment or corporation tax as normal. That makes a big difference to cash flow.
The three tests
1. The business test
You carry out construction work in the UK through a bank account.
2. The turnover test (excluding VAT and materials)
| Business type | Construction turnover needed in the last 12 months |
| Sole trader | £30,000 |
| Partnership | £30,000 per partner or £100,000 for the whole partnership |
| Limited company | £30,000 per director or £100,000 for the whole company |
If a company is controlled by 5 people or fewer, it must show £30,000 of turnover for each of them. These tests were unchanged by the April 2026 CIS changes, which brought in nil returns for contractors.
3. The compliance test
In the last 12 months you must have filed tax returns and paid tax on time. Some minor lapses are allowed.
Changing business structure
If you change from a limited company to a sole trader, the new business:
- registers for CIS as a subcontractor
2. is paid under deduction, at 20%, until approved
3. applies for gross payment status once it meets the turnover test for the new business. Turnover from the old company doesn’t count
The same applies if a sole trader incorporates: the company starts again from the beginning.
Getting refunds while you wait
Deductions taken before gross status is granted count towards your tax bill. Sole traders can get any overpayment back after the tax year. Limited companies can offset CIS deductions against their monthly PAYE bills. See CIS tax refunds.
Keeping your status
HMRC reviews gross payment status every year. Late filing or late payment can lead to it being withdrawn. A withdrawn status means you cannot reapply for 12 months.
Checklist for changing structure
- Register the new business for CIS as a subcontractor before it starts work
- Give contractors the new UTR and business details so they can verify you
- Keep CIS statements for the old and new business separately
- Track the new business’s net construction turnover monthly, so you know when it passes the test
- File every return and pay every tax on time, so the compliance test is met
Frequently asked questions
Can I apply for gross payment status straight away?
Only if you meet the turnover test, which needs at least 12 months of trading history, or contracts showing you will meet it.
Does VAT count towards the turnover test?
No. VAT and the cost of materials are excluded.
Is gross status worth it?
Yes, for cash flow, if you stay compliant.
Do I need an accountant to apply?
No, but we can check that you meet the tests.
Related: tax returns for electricians.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with CIS registration and gross payment status. See our CIS tax refund service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
