In the world of construction recruitment, staying on top of compliance and cash flow can feel like walking a tightrope. Between verifying UTRs, ensuring correct tax treatment, and paying contractors on time, there’s a lot to manage. One term that often pops up — but isn’t always fully understood — is Gross Payment Status (GPS). And while it might seem like something only subcontractors need to worry about, the reality is quite different.
In this post, we’ll explain exactly what gross payment status is, how it fits into the Construction Industry Scheme (CIS), and why it matters just as much to recruitment agencies as it does to the workers they place.
What is gross payment status?
Under the UK’s Construction Industry Scheme (CIS), most self-employed subcontractors in construction are subject to tax deductions at source. The standard CIS rate is 20%, and if a subcontractor isn’t registered with HMRC, the rate jumps to 30%. However, if they apply and qualify for Gross Payment Status, their payments are made in full, with no tax deducted at source.
HMRC grants GPS to subcontractors who meet certain conditions, including:
- A clean compliance record (e.g. filing returns and making payments on time)
- Meeting turnover thresholds
- Having a UK bank account and operating within the construction industry
This means the subcontractor is paid the full amount for their work and then handles their own tax payments directly with HMRC.
Why should recruiters care?
On the surface, GPS sounds like a subcontractor’s concern — after all, it’s about how they get paid. But for recruitment agencies, GPS can have a major impact on how much you pay, when you pay, and how you manage your cash flow.
Here’s why it matters:
1. GPS affects how much money leaves your business
If a contractor doesn’t have GPS, you’re required to deduct tax at source and pay it to HMRC, effectively managing the tax administration on their behalf. This process adds an extra layer of admin — and it impacts the timing and volume of cash flowing in and out of your agency.
2. Delays in verifying GPS can create cash flow friction
When placing new subcontractors, you may need to verify their CIS status and GPS with HMRC. Delays in this process can lead to payment disputes or hold-ups, especially if the contractor expects gross pay but hasn’t yet received confirmation from HMRC.
3. Inaccurate deductions can lead to compliance risks
Getting deductions wrong — for example, paying gross to a subcontractor who doesn’t have GPS — could result in penalties. On the flip side, over-deducting can damage your contractor relationships and potentially lead to claims.
4. Your funding needs vary depending on GPS status
If you’re advancing payments to contractors ahead of client invoices being paid, the GPS status of those contractors affects your net outlay. Agencies working with a mix of gross and net-paid subcontractors need a flexible funding solution that understands the nuances of CIS and GPS.
The RFS Build solution
At RFS, we work closely with construction recruiters who deal with exactly these issues every week. Our RFS Build product is designed to handle the complexities of construction contractor payments — including GPS — with ease.
Whether your subcontractors are paid gross or net, we:
- Fund your payroll so you can pay them on time, every time
- Manage deductions and compliance under CIS
- Give you visibility and control over your cash flow
So instead of stressing over gross or net status, you can focus on what you do best: placing skilled workers on site.
Final thoughts
Gross payment status isn’t just a tax detail for contractors — it’s a critical piece of the puzzle for any construction recruitment agency. By understanding how GPS works, and having the right funding partner in place, you can avoid compliance headaches and keep your cash flow steady.
If you’re dealing with subcontractors and CIS payments, and want a smoother way to manage it all, RFS Build is here to help.
