- Gross payment status lets subcontractors get paid with no tax taken off.
- Sole traders need £30,000 in qualifying net receipts.
- Partnerships and companies must pass £30,000 per partner or director, or meet the £100,000 alternative test.
- Net qualifying figures exclude VAT and direct materials.
- From 6 April 2024, HMRC added VAT checks to the test for gross payment status.
To pass the HMRC CIS gross payment status turnover test, sole traders need at least £30,000 in net construction turnover over the prior 12 months. Partnerships and limited companies must reach £30,000 per partner or director, or meet an alternative £100,000 whole-business test.
Gross payment status lets subcontractors receive payments with 0% tax deducted under official GOV.UK guidance. This protects steady cash flow on jobs. Under Schedule 11 of the Finance Act 2004, you must pass the business test, the turnover test, and the compliance test.
This guide breaks down each threshold. We cover sole trader limits, partner multipliers, director rules, and net calculation steps.
Need general record guidance? Review our guide on how long to keep business records for UK retention rules.
Statutory framework and core tests
HMRC sets three tests for gross payment status:
- The Business Test: You must show HMRC that your business runs genuine commercial operations under CIS rules.
- The Compliance Test: The applicant must have paid tax and National Insurance on time in the past. From 6 April 2024, HMRC added VAT compliance to the statutory compliance test required to obtain and retain gross payment status.
- The Turnover Test: Sole traders must show £30,000 of net construction turnover in the 12 months before applying.
Under HMRC CISR44090 and HMRC CISR44160, you cannot pro-rate qualifying receipts. Subcontractors trading for six months cannot scale up receipts to 12 months. Part-time trade does not lower the limit. You must show actual qualifying receipts.
Turnover thresholds across business structures
Thresholds depend on business structure under HMRC CISR44100 and SI 2005/2045.
| Business Structure | Standard Revenue Threshold | Alternative Threshold | Relevant Person Count |
|---|---|---|---|
| Sole Trader | £30,000 qualifying net receipts | None (standard test only) | The individual proprietor |
| Partnership | £30,000 × number of partners | £100,000 total qualifying net receipts | Individual partners and relevant persons in corporate partners |
| Limited Company | £30,000 × number of directors | £100,000 total qualifying net receipts | Directors and beneficial shareholders in close companies |
For partnerships, multiply £30,000 by the number of partners and key corporate persons. Total headcount sets the figure. For companies, multiply £30,000 by the number of directors and major shareholders.
If a company has four directors, the standard test requires £120,000. That is £30,000 times four. But partnerships and firms can also use the £100,000 whole-business test instead. If total qualifying receipts hit £100,000, they pass.
Calculating net construction turnover
Under HMRC CISR44130, net construction turnover equals gross construction receipts minus VAT and the direct cost of materials.
HMRC sets clear rules on allowable related materials:
- Allowable Related Materials: Land, building materials, and consumable items used in jobs. It also includes plant fuel, plant hire costs, and CITB levies.
- Excluded Costs: You cannot deduct travel fuel or the purchase price of scaffolding.
Keep every material cost itemised on invoices.
Worked calculation: £100,000 alternative company test
Take a small carpentry firm run as a limited company with three directors. Over 12 months, the firm billed £168,000 across commercial jobs. Their invoiced figures exceeded standard requirements.
| Accounting Component | Amount | HMRC Treatment |
|---|---|---|
| Gross Invoiced Receipts | £168,000 | Starting gross construction receipts |
| Output VAT Charged (20%) | −£28,000 | Deducted per statutory calculation rules |
| Direct Timber and Fasteners | −£24,500 | Deducted as direct building materials |
| Plant Hire Costs (Scissor Lift) | −£7,500 | Deducted as allowable plant hire |
| Plant Fuel for Generators | −£1,800 | Deducted as fuel for plant |
| Travel Fuel (Vans) | £0 | Excluded: allowable materials exclude travel fuel |
| Net Qualifying CIS Income | £106,200 | Qualifying net construction receipts |
Under the standard test, three directors require £90,000. That is £30,000 times three. The firm's net construction income of £106,200 passes the statutory threshold easily. It also beats the flat £100,000 alternative test.
Ongoing compliance and statutory standards
Gross payment status stops CIS deductions from your invoices. But you must keep compliance clean. Under HMRC rules, you must maintain ongoing tax compliance to retain your gross payment status. Subcontractors must satisfy all three statutory criteria simultaneously.
From 6 April 2024, HMRC added VAT compliance to the statutory compliance test required to obtain and retain gross payment status. Late filings put your status at risk. Review our guide on HMRC VAT late submission penalties to track points thresholds and appeal rules.
Reviewing broader director duties? See our guide to directors loan account s455 tax for small company rules.
Application checklist for gross payment status
Before applying online through HMRC, verify these items:
- Confirm active UK construction operations.
- Check your records. Calculate net construction receipts over the prior 12-month window.
- Assemble invoices for plant hire, plant fuel, and consumable items.
- Deduct VAT directly. Take off material costs from gross receipts.
- Check tax and National Insurance history, plus VAT filings since 6 April 2024.
Frequently Asked Questions
What is the revenue threshold for CIS gross payment status?
Sole traders must show £30,000 in net construction turnover over the past 12 months. Partnerships and companies need £30,000 per partner, or £100,000 across the whole firm.
How is net construction turnover calculated for CIS?
Net turnover equals gross construction receipts minus VAT and direct material costs like timber and plant hire.
Can you pro-rate turnover if you traded for less than 12 months?
No. HMRC requires real net construction receipts over the full 12 months without pro-rating.
What is the £100,000 alternative test for companies?
A company or large partnership qualifies if its total net construction turnover reaches at least £100,000, regardless of headcount.