Whether you’re applying for CIS gross payment status or trying to maintain it, passing HMRC’s CIS compliance tests is essential. Fail, and you could face:
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Immediate loss of gross payment status
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Higher tax deductions at 20% or 30%
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Delays to cash flow
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Increased scrutiny and penalties
In this blog, we’ll explain what HMRC checks, how to pass their CIS compliance tests, and how to stay penalty-free and cash-flow positive.
✅ What Are HMRC’s CIS Compliance Tests?
To apply for or retain gross payment status, HMRC expects your business to meet certain compliance standards. These include:
1. Timely Tax Returns
You must submit:
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CIS returns (monthly, by the 19th)
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PAYE submissions (FPS/EPS on time)
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VAT returns (quarterly or monthly, as applicable)
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Corporation Tax returns (CT600 on time)
2. Timely Tax Payments
You must pay:
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PAYE and National Insurance
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VAT
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Corporation Tax
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CIS deductions (if applicable)
Payments must be on or before the deadline. Late payments—even by a few days—can cause a compliance failure.
3. Accurate Record-Keeping
HMRC expects you to:
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Keep full records of subcontractor payments and CIS deductions
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Store verification numbers and deduction statements
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Clearly record tax liabilities and submissions
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Separate labour from materials on invoices
🚧 What Happens If You Fail a Compliance Test?
Failing a compliance test can result in:
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Refusal or withdrawal of gross payment status
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Higher deduction rates (30%) on payments received
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Delayed refunds or offsets
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Possible investigation or penalty
HMRC reviews your compliance at least annually, and failure to meet the standards may require 12 months of clean compliance before you can reapply.
🛠️ How to Pass HMRC’s CIS Compliance Tests (Step-by-Step)
Step 1: File All Tax Returns On Time
Set up calendar reminders or use accounting software to ensure you never miss:
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CIS returns (due by the 19th each month)
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VAT and PAYE submissions
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CT600 annual return
Tip: Late returns—even if no tax is owed—still count against your compliance.
Step 2: Pay Taxes Promptly
Ensure all liabilities are paid:
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Before or on the due date
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In full (partial payments do not count)
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Via the correct HMRC reference and payment method
Pro tip: Set up Direct Debits to avoid human error and late payments.
Step 3: Keep Detailed and Organised Records
You must maintain clear, complete, and retrievable records for:
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CIS verifications
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Deduction statements (sent to subcontractors)
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Payments made and received
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Contracts and invoices
Use cloud software like Xero, QuickBooks or BrightPay to automate CIS tracking.
Step 4: Conduct Monthly CIS Health Checks
Before the 19th of each month:
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Ensure all new subcontractors are verified
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Calculate and apply the correct CIS rate (0%, 20%, or 30%)
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Submit your return and issue deduction statements
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Pay the deductions to HMRC
Step 5: Review Compliance Quarterly
Hold a quarterly internal review or work with your accountant to:
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Review all HMRC deadlines and submissions
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Reconcile tax payments
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Ensure subcontractor CIS details are up to date
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Prepare for HMRC audits or reviews proactively
⚠️ Common Reasons Construction Companies Fail CIS Compliance Tests
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Submitting a CIS return late by even one day
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Forgetting to verify new subcontractors
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Applying the wrong deduction rate
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Mixing up VAT and CIS liabilities
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Delaying PAYE payments due to cash flow issues
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Not responding to HMRC correspondence promptly
👷♂️ Real-Life Example: Turning a Failing CIS Record Around
We worked with a civil engineering contractor whose gross payment status was withdrawn due to two late PAYE submissions and a missed CIS return.
We:
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Reviewed and corrected all past filings
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Created a monthly compliance checklist
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Set up automatic reminders and filing software
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Reapplied for gross status after 12 months of clean compliance
They successfully regained their status and now manage CIS confidently with zero penalties.
📞 Need Help Passing HMRC’s CIS Compliance Tests?
At Thomas Emlyn Ltd, we specialise in keeping construction businesses compliant, efficient, and penalty-free.
We’ll help you:
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Pass HMRC’s CIS compliance tests
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Regain or protect your gross payment status
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Set up efficient, automated systems
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Communicate with HMRC on your behalf
📞 Book a discovery call and stay on the right side of HMRC—without the stress.
📌 Final Thoughts
HMRC’s compliance tests for CIS aren’t complex—but they are strict. A single missed deadline can cost you gross payment status and slow your business down. With the right systems and support, staying compliant is easy and profitable.