Last updated: 16 October 2026
The question
My company applied for gross payment status under the Construction Industry Scheme, but HMRC rejected it, saying my personal tax was paid late. I thought I paid on time. How can this be?
What is gross payment status?
Under the Construction Industry Scheme (CIS), contractors normally deduct 20% from payments to registered subcontractors (30% if unregistered). With gross payment status (GPS), you are paid in full and deal with your own tax later. This is a big help for cash flow.
The three tests
| Test | What HMRC checks |
| Business test | You do construction work in the UK and run the business through a bank account |
| Turnover test | Net construction turnover (excluding VAT and materials) of at least £30,000 for a sole trader; for partnerships and companies, £30,000 per partner or director, or £100,000 in total |
| Compliance test | You have filed returns and paid tax on time in the previous 12 months |
Why a late payment matters
For a company, the compliance test covers the company’s own taxes and also the personal tax affairs of its directors and, for close companies, its main shareholders. One late Self Assessment payment by a director can be enough to fail. HMRC’s systems look at when payment reached HMRC, not when you sent it, so a cheque or transfer that arrived after 31 January counts as late. HMRC’s rules allow only a few minor late payments in the 12-month period, and VAT compliance is now also part of the test.
Example
A building company with two directors applies for GPS. Its own returns are all on time. But one director paid his Self Assessment balance on 3 February, three days late. HMRC refuses the application. After 12 months of full compliance, the company can reapply.
How to appeal or reapply
- You can appeal within 30 days of the refusal if you think HMRC got it wrong, for example if the payment was actually on time or HMRC misallocated it.
- A reasonable excuse, such as serious illness or an HMRC system error, can be considered.
- Otherwise, keep everything on time for 12 months and apply again.
Keeping gross payment status
HMRC reviews GPS holders every year. If you fail the compliance test, HMRC can remove the status and you will go back to 20% deductions. HMRC also has powers to remove GPS immediately where it suspects fraud.
Tips for contractors and subcontractors
- Pay all taxes by Direct Debit or a few days early.
2. Make sure directors’ personal tax is up to date.
3. Keep a business bank account and clear records of turnover.
4. File CIS monthly returns by the 19th, even nil returns if required.
Subcontractors on 20% deductions
If you are refused GPS, you can still reclaim CIS deductions. Sole traders set them against their tax bill on the Self Assessment return, and companies offset them against PAYE through the EPS or claim a refund after the year end.
Frequently asked questions
Can a new business get GPS?
Only once it can show 12 months of turnover and compliance.
Does a late VAT return count?
Yes, VAT obligations are now part of the compliance test.
How long does HMRC take to decide?
Usually around 90 days.
Can I transfer GPS when I incorporate?
No. The new company must apply in its own right.
Related: transferring GPS from a sole trader, sending CIS returns online and registering a consultancy under CIS.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with CIS gross payment status applications. See our CIS accountants 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 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
