The compliance test is one of the three conditions a subcontractor must meet to qualify for, and retain, Gross Payment Status (GPS) under the Construction Industry Scheme. It requires that all of the applicant's tax obligations have been met on time in the preceding 12 months, with no late Self Assessment returns, no overdue income tax or Corporation Tax payments, and no PAYE defaults.
HMRC assesses the compliance test at the point of application and at each annual GPS review. The 12-month window is a rolling period, so a subcontractor who settled a debt late two years ago is not automatically barred, but one who missed a payment or return within the past year will fail the test and cannot obtain or keep GPS until the 12-month clean record is re-established.
Obligations caught by the compliance test include:
- Self Assessment returns (filed on time, even if the balance was then paid late).
- Income tax and Class 4 NIC payments on account and the balancing payment.
- Corporation Tax returns and payments for limited companies.
- PAYE and employer NIC for any employees the business has.
- VAT returns and payments if the business is VAT-registered.
Because GPS delivers a 0% deduction rate rather than the standard 20%, losing it due to a compliance failure has an immediate cash-flow cost: roughly £100,000 a year in withheld cash for a business turning over £500,000. The Finance Act 2026 five-year reapplication ban applies only to GPS removed on fraud grounds, not to loss through a compliance failure, but the commercial disruption of losing GPS in any circumstance underlines why keeping all tax obligations current is essential for construction businesses.
The three GPS qualifying tests, including the compliance test, are explained in full at CIS gross payment status: how to qualify, apply and keep it. The April 2026 changes that affect GPS holders are at CIS April 2026 rule changes explained.