For many construction business owners, the Construction Industry Scheme (CIS) is a constant—and often frustrating—part of life. But one detail can make a massive difference to your cashflow: whether you operate under Gross Payment Status (GPS) or Net Status.
Understanding this difference isn’t just important—it’s critical. Because if you’re under net status, a huge chunk of your hard-earned profit might be tied up with HMRC, sitting in their account instead of yours.
Let’s break it down.
What’s the Difference Between Gross and Net Status?
Under CIS:
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If you’re on net status, HMRC automatically deducts 20% from payments made to your business as a subcontractor.
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If you’re on gross payment status, you get paid in full, and handle tax later through your return.
It sounds like a simple admin detail. But in real terms, it can tie up tens of thousands of pounds and seriously hurt your cashflow.
A Real-World Example
Let’s say your construction business has:
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Turnover: £1.3 million
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Materials: £600,000
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Labour (employees): £700,000
Here’s what happens under Net Status:
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HMRC withholds 20% of the £700,000 paid to your business:
→ £140,000
Now, you also have:
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A PAYE liability of £2,000/month, or £24,000/year
→ This gets offset against the £140,000 being withheld
So far, you’re £116,000 down in cashflow.
But it doesn’t stop there.
What About Subcontractors?
Let’s say you also pay £525,000 of your turnover to subcontractors.
If only 40% of those subcontractors are under net deduction (and the rest are on gross status), that’s:
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£210,000 subject to 20% CIS
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Which means you’re deducting £42,000 from them—and you can offset that against your withheld CIS too
Final Tally
So the amount HMRC is sitting on looks like this:
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£140,000 (withheld from you)
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– £24,000 (PAYE offset)
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– £42,000 (CIS from subcontractors)
= £74,000 still locked away
And here’s the kicker:
That £74,000 is 48% of your annual profit—just sitting in HMRC’s account, not yours.
What Could You Do With That £74K?
That’s not just a number. That’s money you could use to:
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Fund materials up front for new jobs
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Take on an extra crew or invest in training
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Negotiate better buying terms or pay suppliers faster
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Avoid taking out expensive finance just to stay afloat
Instead, it’s held by HMRC—before you’ve even filed your tax return.
Ask Yourself:
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What do you need to fund jobs?
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Can you afford to lose 48% of your profit to withheld tax?
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Are you borrowing money just to plug cashflow gaps?
→ Remember, interest on finance eats into your net profit -
Can you invest in your team or your future like this?
So, What’s the Fix?
If you’re eligible, applying for Gross Payment Status is one of the most impactful moves you can make.
It means:
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You get paid in full
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You manage your tax
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You unlock capital you can reinvest into growth, not debt
It’s a smart, often overlooked tax strategy—and we help construction firms do it every week.
Let’s Make It Easier
Ready to take action – Book a discovery call here.
If you want help:
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Checking your eligibility
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Understanding the numbers for your business
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Or getting the application handled professionally
👉 Get in touch with us at Thomas Emlyn
Let’s stop HMRC sitting on your profit.
PS – Help Us Change the Rules
I’ve started a petition for Parliament to review the CIS scheme.
Right now, construction businesses are treated like they’ve done something wrong—before they’ve even started trading.
Gross Payment Status should be automatic, and only lost if you fall foul of the rules—not something you have to prove you deserve.
🖊️ You can sign the petition by clicking here.
Let’s build something better.
