In construction recruitment, managing compliance and cash flow isn’t always straightforward. Between checking UTRs, applying the correct tax treatment and ensuring prompt contractor payments, there’s a lot going on. One term that regularly comes up — yet is often not fully understood — is gross payment status (GPS). While it might sound like something that only affects contractors, the reality is that it can have real implications for recruitment agencies too.
What is gross payment status?
Under the UK’s Construction Industry Scheme (CIS), contractors normally deduct tax at source from payments made to subcontractors. The standard rate is 20%, rising to 30% if the subcontractor isn’t registered with HMRC. However, if a subcontractor applies for and qualifies for gross payment status, they can be paid the full amount of their bill without any tax taken off at source.
To be granted GPS, HMRC expects subcontractors to demonstrate criteria such as a clean record of filings and tax payments, meeting certain turnover thresholds, and operating through a UK bank account within the construction industry.
Once approved, the subcontractor is responsible for settling their own tax and National Insurance liabilities directly with HMRC.
Why GPS matters to recruiters
At first glance, GPS might seem like a concern only for the subcontractor receiving payments — but for agencies, it affects several core aspects of your business:
1. It influences your cash flow and outlays
If a contractor does not hold GPS, your agency must apply CIS deductions and pay them over to HMRC. This means retaining more cash in your business for longer and managing tax remittance, which impacts working capital.
2. Delays in status verification can disrupt payments
When placing a new subcontractor, you’ll often need to verify their CIS and GPS status with HMRC. Any delays or miscommunication can hold up payments, especially if the worker expects to be paid gross but the confirmation hasn’t arrived in time.
3. Incorrect deductions bring compliance risk
Paying a subcontractor gross without confirmed GPS can expose your agency to HMRC penalties, while over‑deducting can damage relationships and even lead to claims from contractors.
4. Funding needs differ depending on GPS status
If you’re advancing pay to contractors before client invoices are settled, whether they’re paid gross or net affects your cash flow. Agencies working with a mix of GPS and non‑GPS subcontractors benefit from funding solutions that understand these differences.
How having the right support helps
Understanding GPS and how it fits within CIS is critical for construction recruiters. With the right financial partner, you can reduce administrative burden, handle compliance more effectively and reduce the cash flow friction that comes from managing mixed payment statuses.
RFS Build is our dedicated funding solution designed specifically for construction recruitment agencies. It combines sector expertise with flexible finance to help you stay compliant, keep contractors paid on time, and grow with confidence. Find out more here
