CIS Gross Payment Status Refused? Why, and How to Get It
The short answer
Gross status needs a business bank account, enough turnover and a clean 12-month tax record. If HMRC removes it, you have 30 days to appeal.
- Three tests: a construction business run through a bank account, enough labour turnover and a clean 12-month compliance record.
- Since April 2024, VAT counts in the compliance test alongside PAYE, CIS and Self Assessment.
- You have 30 days to appeal a removal. If it stands, you wait 1 year to reapply.
- From 6 April 2026, fraud-related removal is immediate and the bar on reapplying is 5 years.
On a £10,000 labour invoice, 20% CIS means £2,000 that doesn't reach your bank this month. It comes back eventually, against your tax bill or as a refund. But wages and materials don't wait for that.
That's why having CIS gross payment status refused or removed hurts so much, and why main contractors often ask for it. Here's how the tests work, why HMRC says no, what changed in 2026 and what to do this week. If 20% deductions are squeezing your cash right now, book a free strategy call.
This is general information from a contractor's experience, not tax or legal advice. For your situation, speak to a construction-specialist accountant.
The 3 tests in one table
HMRC checks three things when you apply, and again at every yearly review.
| Test | What HMRC needs to see | Typical reason it fails |
|---|---|---|
| Business test | You do construction work (or supply labour for it) in the UK, and the business is run through a bank account | Cash jobs, personal account used for the business |
| Turnover test | Last 12 months, ignoring VAT and materials: £30,000 sole trader; £30,000 per partner or £100,000 partnership; £30,000 per director or £100,000 company | Mostly materials, or a new company with a short history |
| Compliance test | Tax returns filed and tax paid on time over the last 12 months: CIS, PAYE, Self Assessment, and VAT since April 2024 | Late VAT or PAYE payments, a late return |
If your company is controlled by 5 people or fewer, you need £30,000 of turnover for each of them. At the yearly review of a limited company, HMRC reviews the company itself, not the individual directors.
Why HMRC refuses or removes CIS gross payment status
Most refusals are about the compliance test, not the turnover. HMRC does allow a few small slips. The table shows the main ones the rules allow.
| Obligation | Allowed slip | Limit |
|---|---|---|
| CIS monthly return, VAT return | Up to 28 days late | No more than 2 other slips in 12 months |
| CIS/PAYE payment, VAT payment | Up to 14 days late | No more than 2 other slips in 12 months |
| Income tax payment | Up to 28 days late | No other slip in 12 months |
| Corporation Tax payment | Up to 28 days late | Interest charged but no penalty |
| Any tax payment | Late amount under £100 |
Anything beyond those, and you fail the review unless HMRC accepts you had a reasonable excuse.
Paying the VAT bill a few weeks late to protect cash. Since April 2024, a VAT payment more than 14 days late counts against your gross status, just like PAYE.
Other common triggers:
- New shareholders not reported to HMRC within 30 days.
- A change of structure, such as sole trader to limited company. You usually need to register again and reapply.
- Turnover that is mostly materials. Materials don't count.
Problems like this usually trace back to cash and contracts. The free 4-minute Construction Business Scorecard shows your weakest area first. Want someone to run valuations, variations and final accounts for you? See our commercial management service.
Still losing 20% on every invoice?
Book a free call with our team. We'll look at your tax record, your cash and what to fix before your next HMRC review.
What changed in April 2026
From 6 April 2026, HMRC has tougher powers against fraud in construction supply chains. If a business knew, or should have known, that a payment it made or received was connected to fraud, HMRC can:
- Remove gross status immediately, with no 90-day notice.
- Make the business pay the lost tax.
- Charge a penalty of up to 30%, on the business or its officers.
After an immediate removal, you can't reapply for 5 years. For an ordinary failed review it is still 1 year. For the full list, including monthly nil returns, see the CIS changes from April 2026.
For a genuine business, the practical lesson is due diligence on who you pay: verify every subcontractor with HMRC and keep the records. If HMRC has already written to you, see what to do in an HMRC compliance check.
Losing 20% on every invoice and short on cash because of it? Book a free strategy call and we'll look at your numbers with you.
If you get the warning letter: the next 7 days
At the yearly review, HMRC writes first to say you're about to fail, and why. This is your best chance.
- Day 1: read the reasons. Which return or payment, which month, how late.
- Day 1–2: get the evidence. Bank statements, submission receipts, any HMRC agreement to pay later.
- Day 2–3: check for a reasonable excuse. Illness, an HMRC system fault, a payment HMRC misallocated. Write it down with dates.
- Day 3–5: reply in writing. Short, factual, with evidence. If HMRC accepts it, it won't remove your status.
- Day 5–7: fix the cause. Set Direct Debits and calendar reminders for every deadline below.
If HMRC still removes your status, the letter will give you 30 days from its date to appeal. Removal takes effect after 90 days. Once an appeal is logged against a removal with notice, HMRC holds the switch to net while it's decided.
How to apply (or reapply)
Apply online through HMRC (sole trader, partnership or company form). For a limited company, have ready:
- Company UTR and bank details
- Evidence of turnover: bank statements, CIS payment and deduction statements, invoices, contracts
- Every director's and controller's details: name, address, UTR, National Insurance number
- VAT and PAYE references if you have them
If HMRC cancelled your status after a failed review, you must wait a year from the cancellation date.
A 12-month compliance calendar
Gross status is kept or lost by dates. Put these in the diary on day one.
| When | What | Who |
|---|---|---|
| 19th of every month | CIS monthly return (if you also pay subcontractors) | Contractors |
| 22nd of every month | PAYE and CIS payment to HMRC (19th by post) | Employers and contractors |
| 1 month + 7 days after each VAT period | VAT return and payment | VAT-registered |
| 9 months + 1 day after year end | Corporation Tax payment (profits up to £1.5M) | Limited companies |
| 31 January | Self Assessment tax bill | Sole traders, partners, directors |
| Every month | Check CIS statements from contractors (due within 14 days of the tax month end) | Subcontractors |
Get a construction-specialist accountant. One who understands CIS, retentions and reverse charge VAT will pay for themselves many times over.
Two habits make the calendar easy. Keep a separate tax account and move the tax share out the day money lands. Pay every HMRC bill by Direct Debit.
If the VAT bill is the problem, read can't pay the VAT bill. If cash is tight across the board, start with our 7-day cash plan.
The Cash Flow & Margin Blueprint
CIS, VAT reverse charge and retentions explained, plus the separate tax account habit.
Get the free guideReady to stop financing HMRC and run the business on structure?
Book a free strategy call.
Before your next review
- Business runs only through the business bank account
- Construction labour turnover (excluding VAT and materials) above the threshold
- Every HMRC deadline in the diary, with Direct Debits set
- VAT treated as strictly as PAYE: never more than 14 days late
- Every subcontractor verified, records kept
