Registering
HMRC's subcontractor guidance says sole traders, limited company owners, partners and trusts who work for a contractor should register. Registered subcontractors have 20% deducted, unregistered ones 30%.
Registering online gives net payment status (GOV.UK: how to register). The registration needs the legal and trading names, the business's UTR, any VAT number and the trading start date, plus National Insurance numbers, company registration numbers or partnership details depending on the business. A business that is both a subcontractor and a contractor registers as both.
Getting paid
The subcontractor gives each contractor the details used at registration, including the UTR and legal or trading name, so the contractor can verify them (GOV.UK: get paid). No deduction is made from VAT, consumable stores, plant hired for the job, manufacturing or prefabricating materials, or materials the subcontractor paid for directly.
Each month the contractor must give a payment and deduction statement showing what was paid and deducted (GOV.UK). The subcontractor keeps these, as HMRC may ask for evidence of deductions. If a statement does not arrive, HMRC can be contacted with the contractor's details, payment dates and the reason the statements are missing.
Gross payment status turnover test
| Business | Net construction turnover needed | Source |
|---|---|---|
| Sole trader | £30,000 | GOV.UK |
| Partnership | £30,000 for each partner, or at least £100,000 for the whole partnership | GOV.UK |
| Limited company | £30,000 for each director, or at least £100,000 for the whole company | GOV.UK |
| Company controlled by 5 or fewer people | £30,000 for each of them | GOV.UK |
The other tests
- Turnover is measured excluding VAT and the cost of materials (GOV.UK: gross payment status).
- Business test: the business does construction work, or provides labour for it, in the UK and is run through a bank account (GOV.UK).
- Compliance test: tax and National Insurance have been paid on time in the past (GOV.UK).
Keeping gross payment status
HMRC reviews gross payment status each year, and returns and payments must be on time to keep it (GOV.UK: annual review). Before removing it HMRC writes with the reasons and gives a chance to respond. If the explanation is not accepted, HMRC confirms the status will be withdrawn in 90 days. There are 30 days from that letter to appeal, and after cancellation a business waits a year before reapplying.
From 6 April 2026 HMRC can cancel gross payment status at once where a business knew or should have known that its transactions were connected with fraudulent evasion. The bar on reapplying after that is 5 years (GOV.UK: tackling CIS fraud).
Claiming deductions back as a sole trader or partner
HMRC's guidance says sole traders and partners report their total pay before deductions as income on the Self Assessment return, and the total deductions as CIS deductions. HMRC works out the tax and National Insurance due and sets the deductions against it.
For example, a sole trader's statements show £40,000 of labour with £8,000 deducted at 20%. If the return shows £6,500 of income tax and National Insurance on the year's profit, the £1,500 difference is repaid or set against other liabilities. See Self Assessment deadlines and penalties.
Claiming deductions back as a limited company
A limited company sets its CIS deductions against its own PAYE bill. It sends its FPS and an EPS showing the CIS deductions suffered, and HMRC reduces what the company pays (GOV.UK). Deductions left over in a tax year are carried forward to later months of that year. After the year ends, any excess can be claimed back through HMRC's CIS repayment claim.
The company keeps a record of the deductions used against its PAYE bill on form CIS132 and keeps all the contractors' statements (GOV.UK). See Real Time Information reporting.
Questions
Does gross payment status remove the need to file returns?
No. The income is still reported on the Self Assessment or Company Tax Return (GOV.UK: gross payment status).
What changes must a subcontractor report?
Changes such as a new address, business name or partners are reported to HMRC, as HMRC's changes guidance sets out.
In Accountin
In Accountin, a limited company's CIS deductions suffered are claimed on the Employer Payment Summary prepared with its payroll, and a contractor client's CIS payments and statements are kept on the CIS page.
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