If you operate in the UK construction industry, you’ll already be familiar with the Construction Industry Scheme (CIS). But even if you hold Gross Payment Status, meaning contractors should pay you in full without deducting tax at source, you might still face issues with CIS deductions.

This article explains why deductions can still occur, what to do if they happen, and how to protect your cash flow and tax position as a gross payment status holder.

What Does Gross Payment Status Mean Under CIS?

Gross Payment Status is designed to improve cash flow for compliant subcontractors. If you qualify, contractors pay you the full invoiced amount without taking off CIS deductions (which are usually 20% or 30% for standard or unverified subcontractors).

To obtain Gross Payment Status, HMRC requires you to:

  • Have a good record of tax compliance

  • Prove your business is run properly

  • Demonstrate financial responsibility

On paper, this means you receive your payments in full and settle your Income Tax and National Insurance directly through your annual tax return or Corporation Tax return.

Why CIS Deductions Can Still Be Made

Despite Gross Payment Status, deductions can still happen. Common reasons include:

Contractor Verification Issues

If your contractor cannot verify your Gross Payment Status with HMRC (perhaps due to an incorrect UTR, company name mismatch, or outdated records), they may default to deducting 20% CIS.

Late or Failed Status Renewal

Gross Payment Status isn’t permanent. HMRC reviews your compliance annually. If your status is suspended or revoked, contractors will start deducting tax immediately.

Errors in Contractor Administration

Some contractors deduct CIS simply through misunderstanding or clerical errors, even when your Gross Payment Status is valid.

Work Falling Outside CIS Rules

Certain construction‑related activities fall outside CIS. However, confusion around scope can sometimes lead to incorrect deductions.

For a breakdown of key deduction triggers, see When to deduct CIS from payments.

How to Handle Incorrect CIS Deductions

If you’ve had CIS deducted in error, you’re not powerless. Here’s how to resolve the issue:

Check Your HMRC Status

Log into your HMRC account or ask your accountant to confirm your current Gross Payment Status.

Request a Correction from the Contractor

Provide proof of your Gross Payment Status (usually your HMRC verification confirmation). Contractors can issue a corrected payment and amend their monthly CIS return.

Claim Back Through Your Tax Return

If the contractor has already filed and won’t amend, you can reclaim any over‑deductions via your annual Self‑Assessment or Corporation Tax return.

Maintain Accurate Records

Keep all CIS payment and deduction statements. These are essential when reconciling your accounts and making claims with HMRC.

If you’re looking to reclaim wrongly deducted tax, our How to reclaim CIS deductions as a subcontractor guide has practical tips.

Protecting Your Gross Payment Status

Because Gross Payment Status is a privilege rather than a right, you must actively maintain it. To avoid unnecessary deductions:

  • Stay Compliant: Submit all tax returns and payments on time. HMRC is strict on compliance.

  • Keep HMRC Updated: Inform HMRC promptly of any changes in your business (e.g., trading name, address).

  • Check with Contractors: Remind contractors of your Gross Payment Status and provide your UTR when needed.

  • Use a Specialist Accountant: An accountant familiar with CIS can monitor your compliance, handle disputes, and ensure smooth renewals.Discover best practices in How to avoid CIS over‑deductions and common pitfalls in Top CIS tax calculation mistakes.

Why Professional Support Matters

At LT Accounting, we regularly assist construction businesses and subcontractors with:

  • CIS verification and compliance

  • Gross Payment Status applications and renewals

  • Reclaiming incorrect deductions

  • Tax planning to maximise cash flow

If you’re a subcontractor with Gross Payment Status and you’ve noticed unexpected CIS deductions, don’t leave it until year‑end to sort out. Early action will help protect your working capital and prevent HMRC issues later.

Final Thoughts

Gross Payment Status is designed to give subcontractors better control over their cash flow — but only if contractors and HMRC records align correctly. If you find yourself facing CIS deductions despite having Gross Payment Status, take swift action to correct the error.

For tailored advice and practical support with CIS and Gross Payment Status, contact LT Accounting today. Our experts will ensure you get paid correctly and stay compliant.