You revert to being paid under deduction at 20%, so a fifth of your labour invoicing starts being withheld and only comes back after the tax year ends. Where removal is immediate because HMRC has reasonable grounds to suspect fraud, or because the business knew or should have known that payments were connected with fraudulent evasion of tax, the consequences from 6 April 2026 are far worse: the business becomes liable for the lost tax, faces a penalty of 30% of it that is chargeable to directors and other connected persons as well as the company, and cannot reapply for five years. After a removal for ordinary compliance failures, the wait before reapplying is one year.
You go back to being paid under deduction. For a labour-only business that is 20% of close to your whole invoice, taken at source, from the next payment — and it stays taken until the tax year ends and the return that recovers it is filed. No extra tax is due. The whole effect is on timing, and it arrives immediately.
The April 2026 CIS package made the consequences more serious than they were, It changed the grounds on which the status can be lost, how long a business is kept out before it can reapply, and where responsibility sits when things go wrong. The practical effect is that losing it is no longer a matter of reapplying next quarter and carrying on.
Removal can follow a failure of any of the three tests. The compliance failures are small and administrative: a CIS return filed after the 19th, a late payment, a Self Assessment or corporation tax obligation missed, or — since 6 April 2024 — a VAT return or payment out of time. Several of those have nothing to do with CIS, and each one counts against the status.
This question is part of Gross payment status, which covers the whole area.
Send us three months of payment and deduction statements. We will tell you what is wrong, what it is costing, and whether gross payment status would fix it.