The 19th, the 22nd, verification numbers, travel sitting inside the deduction, the reverse charge wording on the invoice. Get one wrong and it is your cash, not theirs. We only act for trades.
CIS 340 is explicit: standard and higher. Gross payment status is not a third rate — it is the absence of a deduction. Which one applies to you decides your cash flow for the year, and one of the three is usually an administrative failure rather than a judgement on your compliance.
You invoice and are paid in full. You still owe the tax later, so this is timing rather than a discount — but it is the single largest fix available to a labour-only business. Three tests to get it: business, turnover and compliance.
How to get itThe standard deduction. Where a deduction has been made at the higher rate the contractor must show the verification reference on your statement, complete with any letter on the end of it.
What comes off, and what does notTen points of your turnover held back because a registration or a reference is wrong. It is worth checking rather than assuming, because the fix is usually paperwork rather than anything about how you trade.
Verification, properlyMaterials you have directly incurred come out of the payment subject to deduction. So do consumable stores, fuel other than fuel for travelling, plant hire, the cost of manufacture or prefabrication, and the VAT you have charged.
Travelling expenses and subsistence do not. A line on your invoice for mileage, or for a night away from home, has the deduction taken off it in full. Nothing bounces when this is wrong, which is exactly why it runs for years.
The other half of it is who bought the materials. If the contractor reimburses you for materials, you have not directly incurred the cost and no reduction is due. Buying them yourself and evidencing them properly is what moves the number.
On a £10,000 invoice with no materials, the deduction is £2,000 and you are paid £8,000. Put £3,000 of your own properly evidenced materials through the same invoice and the deduction falls to £1,400 — because it is charged on the remaining £7,000 of labour. Same job, £600 more in the bank now.
The reverse charge, the CIS deduction and the recovery mechanism compound in the same direction for a labour-only subcontractor. Here is what happens on a single £10,000 labour-only invoice to a VAT-registered contractor who is not an end user.
The reverse charge applies. You invoice £10,000 with no VAT added and state that the customer accounts for it. Before March 2021 you would have held £2,000 of output VAT for up to four months. That float is permanently gone from the cycle, and a business still budgeting on its old VAT-inclusive receipts is structurally short.
With no materials to exclude, the contractor deducts £2,000 from the full £10,000. Cash received: £8,000 against a £10,000 sale.
With no output VAT on your sales but input VAT on materials, fuel, plant hire and overheads, your VAT returns tend to produce refunds rather than payments. If you are in a repayment position, monthly returns turn a quarterly refund into a monthly one.
None of this is a reason to panic about the reverse charge — it is a reason to stop treating CIS deductions as a cost. They are a tax asset. If they are not showing as one on your balance sheet, the CIS records and the payment and deduction statements are the first thing to reconcile.
Monthly returns by the 19th, subcontractors verified before you pay them, statements out inside the same 14 days, and the materials split checked rather than accepted.
See what is includedGetting it, and then protecting it. VAT is part of the compliance test now, and from April 2026 losing it costs far more than it used to.
Check if you qualifyWhether it applies, the wording the invoice needs, the end-user notifications you should already hold, and what it did to your working capital.
How it worksThe year end and the return, with CIS suffered reconciled to your statements instead of estimated from your bank.
What you getSo a company subcontractor offsets its deductions monthly through the EPS rather than waiting for the year end to ask for the money back.
How the offset worksThe van-or-car question has three separate answers. Double-cab pick-ups changed in 2025 with two different transitional dates.
Get it rightThese are the changes with money attached for a trade business. Everything below carries the date it applies from.
| From | What changed | Who it hits |
|---|---|---|
| 6 Apr 2026 | Mileage for cars and vans rises from 45p to 55p for the first 10,000 business miles. Above 10,000 stays at 25p. It applies to employee mileage payments and to the self-employed simplified rates. | Everyone with a vehicle |
| 6 Apr 2026 | Statutory Sick Pay from day one, with the Lower Earnings Limit and waiting days removed. Paid at 80% of normal weekly earnings or £123.25 a week, whichever is lower. | Anyone with employees |
| 6 Apr 2026 | Nil CIS returns reinstated for mainstream contractors — if you paid no subcontractors you must file a nil return or notify inactivity by the 19th. | Contractors |
| 6 Apr 2026 | Where labour is supplied through an umbrella company, the agency becomes responsible for PAYE and Class 1 NIC — and where there is no agency, the end client does. | Anyone using agency labour |
| 6 Apr 2026 | Dividend rates rise two points, to 10.75% and 35.75%. The additional rate is unchanged at 39.35%. | Company directors |
| 1 Oct 2026 | The Building Safety Levy commences in England on applications for building control approval involving dwellings. Developments of fewer than 10 units are exempt, and brownfield land pays half rate. | Developers and housebuilders |
| 31 Mar 2027 | The zero rate on installing energy-saving materials ends and reverts to 5%. It is the most time-sensitive VAT date on the list. | Heating, solar and insulation |
Nobody loses money on the job. They lose it on the invoice.CIS 340 · FA 2004 s59 · VATA 1994 s55A
Two. CIS 340 is explicit that there are two rates of deduction — the standard rate of 20% and the higher rate of 30%. Gross payment status is not a third rate; it is the absence of a deduction altogether. The distinction matters because people talk about being "on 0%", which makes gross payment status sound like a rate somebody has set for them rather than a status they applied for, passed three tests to get, and can lose. You are on 20% if you are registered and the contractor verified you. You are on 30% if you are not registered, or if the contractor could not verify you — which is often an administrative failure rather than anything to do with your compliance record.
Yes, and this is the most expensive routine error in the sector. Materials you have directly incurred come out of the deduction base, along with consumable stores, fuel other than fuel for travelling, plant hire, the cost of manufacture or prefabrication, and the VAT you have charged. Travelling expenses and subsistence do not. They sit inside the payment subject to deduction, so a line on your invoice for mileage or for a night away has 20% taken off it. Nothing bounces when this is wrong, which is why it can run for years unnoticed.
No, and this catches people out because the two regimes look joined. The reverse charge uses the CIS definition of construction operations to set its scope, but it is not part of the CIS. It applies where a payment has to be reported under the CIS regulations, not by reference to whether a deduction is actually made. A subcontractor with gross payment status is still within the reverse charge on the same work. The two questions are answered separately, on the same invoice.
Because of where the offset happens. A sole trader recovers CIS deductions through Self Assessment after the tax year ends, so deductions suffered in April wait almost two years for the return that recovers them. A company cannot claim them on its corporation tax return at all — it offsets them monthly through the EPS against PAYE, National Insurance, student loan repayments and the CIS it has deducted from its own subcontractors. A labour-only company with a small payroll never has enough of those to absorb what it suffers, so the excess sits there until after 5 April. Running a real payroll and claiming the offset every month is cash kept now rather than a refund claimed later.
The consequences of losing it. Since 6 April 2024 VAT filing and payment have been part of the compliance test, both to get gross payment status and to keep it, although minor VAT failures do not cause refusal or removal. From 6 April 2026 a business that knew or should have known that payments it made or received were connected with fraudulent evasion of tax faces immediate cancellation, becomes liable for the lost tax, and faces a penalty of 30% of that lost tax which is chargeable to the business and to its directors and other connected persons. The bar on reapplying after immediate removal rises from one year to five.
For benefit in kind and for capital allowances, most double-cab pick-ups are now cars, and the two changes have different transitional dates — which is why so much of what is written about this is wrong. HMRC applies a primary suitability test: a double-cab is usually equally suited to carrying people and goods, so it has no predominant suitability and is treated as a car. For benefit in kind, a vehicle purchased, leased or ordered before 6 April 2025 keeps the old van treatment until the earlier of disposal, lease expiry or 5 April 2029. For capital allowances the window is much shorter: a contract entered into before commencement with the expenditure incurred before 1 October 2025. The VAT treatment did not change at all, and pick-ups under one tonne payload were already cars.
We look at your last three months of returns and statements, tell you what is wrong and what it is costing, and put a number on the gross payment status question. Then you decide whether you want us.
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