The business test is the first of three conditions a subcontractor must meet to qualify for Gross Payment Status (GPS) under the Construction Industry Scheme. It requires that the applicant carries out construction work (or provides labour for construction work) in the UK and operates the business through a bank account.
The test has two elements, both of which must be satisfied:
- Construction activity in the UK. The business must be engaged in construction operations as defined by the CIS legislation. Businesses providing only design, professional or purely managerial services that fall outside the statutory definition of construction operations will fail this element.
- Bank account. The business must run its finances through a business bank account. A sole trader using a personal account may still satisfy this requirement if HMRC is satisfied the account is used for business purposes, but a dedicated business account removes any ambiguity.
The business test is the threshold-level requirement: it establishes that the applicant is within the scope of the CIS scheme and has the basic business infrastructure in place. Most subcontractors working in construction will satisfy it without difficulty. The more demanding GPS hurdles are the turnover test (minimum net annual CIS receipts by entity type) and the compliance test (clean 12-month tax record).
All three tests must be passed simultaneously. A business that clears the turnover and compliance tests but carries out work that falls outside the statutory construction-operations definition will still be refused GPS. Equally, a business with a genuine construction trade that does not operate a bank account will fail at the first hurdle, regardless of its turnover or compliance record.
For the full GPS qualification framework, see CIS gross payment status: how to qualify, apply and keep it. The cash-flow value of GPS (avoiding the 20% deduction) is explained in the GPS cash-flow guide.