CIS gross payment status for Greater Manchester contractors

What gross payment status is worth

Gross payment status changes how a contractor pays a subcontractor under the Construction Industry Scheme. A subcontractor without it is paid under deduction: 20% of the labour element of each invoice if HMRC's verification confirms registration, or 30% if verification cannot match them. A subcontractor with gross payment status is paid the full invoice, with no deduction, and settles income tax, National Insurance or Corporation Tax through the normal Self Assessment or Corporation Tax return instead.

On £180,000 of net Construction Industry Scheme turnover a year, excluding VAT and the cost of materials, which never form part of the deduction, the difference between the two positions is £36,000 at the 20% rate. Under deduction, that sum sits with HMRC across the year, set against the subcontractor's eventual tax bill. With gross payment status, it stays in the business's bank account and funds wages, materials and plant hire as invoices are paid.

The three tests for gross payment status

HMRC applies three tests before granting gross payment status, set out at gov.uk's Construction Industry Scheme guidance. The business test requires construction work in the UK, run through a bank account. The turnover test requires net construction turnover, excluding VAT and materials, of at least £30,000 for a sole trader, £30,000 for each partner or director, or £100,000 for the whole partnership or company. The compliance test requires tax, National Insurance, VAT and CIS returns and payments on time for the previous twelve months, with HMRC allowing minor and corrected lapses. VAT obligations were added to the compliance test from 6 April 2024, so a pattern of late VAT returns puts gross payment status at risk in a way it did not before that date.

HMRC's new cancellation power from 6 April 2026

Section 220 of the Finance Act 2026 amends Section 66 of the Finance Act 2004 to give HMRC a power to cancel gross payment status with immediate effect, before any review or hearing, on one of four grounds. The business provided false information when registering for gross payment status. The business fraudulently made an incorrect return or gave incorrect information to HMRC. The business knowingly failed to comply with a Construction Industry Scheme obligation. Or the business made or received a payment that it knew, or should have known, was connected to the fraudulent evasion of tax by another business in its supply chain.

A business can appeal a cancellation under this power, but the cancellation itself takes effect the day HMRC acts. The reapplication bar after a cancellation on these grounds is five years; before 6 April 2026 it was one year. HMRC can also charge a penalty of up to 30% of the tax it says was lost, and a new officer-liability power lets HMRC charge a share of that penalty to the business's directors personally, separately from whatever the company itself is assessed to pay. The gov.uk policy paper Tackling Construction Industry Scheme fraud sets out all four grounds and the commencement date, and the text of Section 220 carries the detail in full.

What losing gross payment status costs a Stockport subcontractor

Take an illustrative electrical subcontracting firm based in Stockport, trading through a limited company, with net Construction Industry Scheme turnover of £180,000 a year, excluding VAT and the materials it buys for each job. Holding gross payment status, every invoice is paid in full: a £15,000 monthly invoice to its main contractor arrives in the business's account as £15,000.

HMRC cancels the firm's gross payment status on 1 July, on the ground that a payment it made to another subcontractor was connected to the fraudulent evasion of VAT elsewhere in the supply chain. From that date, HMRC's verification returns the firm as a 20%-deduction subcontractor. The same £15,000 invoice now arrives as £12,000, with £3,000 going straight to HMRC. Over a full year at the same turnover, that is £36,000 a year moving out of the firm's bank account before it is set against the Corporation Tax the firm owes.

The firm cannot reapply for five years, because Section 220 sets that bar for cancellations made on fraud-connection grounds. At a steady £180,000 turnover, £180,000 would move out of the business and into HMRC's hands across the full five years before being set against tax it owes. If HMRC also determines the firm knew or should have known about the fraud, its directors can be assessed personally for a share of the 30% penalty, on top of whatever the company itself is assessed to pay.

Checklist for this week

• Verify every subcontractor with HMRC before the first payment, and keep the verification reference on file.
• Where a subcontractor engages subcontractors of its own, ask who else sits in the chain on that contract, and keep a record of what was asked and answered.
• Keep tax, National Insurance, VAT and CIS returns and payments on time for the trailing twelve months, since one late VAT return now sits inside the same compliance test as the rest.
• If gross payment status is held, review which contracts and supply chains it depends on, since a single payment connected to fraud elsewhere now ends it the same day.
• If gross payment status is cancelled, build a cash-flow plan for a 20% deduction from the next invoice, not from the point an appeal might conclude.
• Read the gov.uk policy paper on these measures before advising directors on the officer-liability risk, since it is a new power from 6 April 2026.

What Buzz does

Buzz runs CIS verification, the monthly return and subcontractor payment and deduction statements for construction clients across Greater Manchester, so the 19th of the month is not something a site manager has to track on top of running jobs. For a client holding gross payment status, that includes a scheduled review of the VAT and CIS filing history, since a lapse is what now puts the status at risk under the 2026 rules.

If a main contractor further up the chain is also paying late on top of a gross payment status loss, Business Debt Recovery recovers construction debts. For the wider position running a business in Greater Manchester, start at our Greater Manchester page, or see payroll and pensions for how CIS deductions sit alongside PAYE for a subcontractor that also employs staff.