CIS gross payment status withdrawn: appeal & re-apply (2026)

Most subbies who lose gross payment status didn't know it was at risk. HMRC re-runs the three tests every 12 months in the background — same business, turnover and compliance checks the original application passed — and the first you hear about a problem is usually a brown envelope from Newcastle.

That envelope is form CIS308. It tells you HMRC is cancelling your gross status, gives you the reason in one or two lines, and starts a 90-day clock. This guide covers what the notice means, what your real options are inside the 90 days, and what comes next if you can't get the decision overturned. For how to apply in the first place, see the CIS302 walkthrough.

The notice you've just received (CIS308)

The CIS308 is the formal notice that HMRC intends to change your tax treatment from gross (0%) to net (20%). Three things on it that matter:

• The reason. One or two sentences citing which test failed — almost always compliance, occasionally turnover. The reason isn't always specific; if it just says "you have failed the compliance test" you have the right to ask for the underlying detail.
• The effective date. 90 days from the date of the notice. Until that date your gross status is unchanged. Contractors who verify you in this window still see 0%.
• The appeal deadline. 30 days from the notice date to lodge a written appeal. This is shorter than the 90-day effect window — easy to miss if you put the letter aside.

Why HMRC pulls gross status

The three tests get re-run silently every 12 months. The compliance test fails most often. Specific triggers we see from the published HMRC guidance and tribunal record:

• One Self Assessment paid more than 28 days late. Even a £200 balancing payment that slid by a month is enough. HMRC's published tolerance is one SA up to 28 days late; beyond that fails the test outright.
• A run of small late payments. HMRC tolerates up to three late payments under £100 each per 12 months. The fourth tips you into a fail.
• Late VAT return. Added to the gross-status compliance test from 6 April 2024. A single late quarterly VAT return now puts the status at risk where previously it didn't.
• Missed CIS300 monthly return. Subbies who also operate as contractors (e.g. main contractor on smaller jobs paying their own subbies) have to file a monthly CIS300 even in months with no payments. A nil return missed counts.
• Director's personal SA late on a Ltd Co. The company's filings can be perfect but a director's own self-assessment paid two months late will fail the company's test.
• Turnover dropped below the threshold. The rolling 12-month labour-only construction turnover has to stay above £30,000 (sole trader) or £30,000 per director / £200,000 total (Ltd Co.). A quiet year can pull you under.
• Live HMRC enquiry or unresolved tax debt. An open enquiry into the past two SAs with unresolved liabilities will fail the compliance test until it's closed.

The 90-day window — what changes when

Three dates worth diarising the moment the CIS308 lands:

Inside that window, your tax treatment is still gross. Contractors who verify you between day 0 and day 90 see the 0% rate as normal. Tell your contractors what's happening — they shouldn't be surprised when verification flips to 20% mid-month.

If you appeal in time, the day-90 effective date can be paused while the appeal is worked. HMRC's own manuals direct caseworkers to suspend the change once an appeal is logged. Lodging the appeal early protects the status during the review.

Appeal route 1 — internal review

Internal review is the cheaper, faster route. A different HMRC officer — not the one who made the original decision — reviews the file against the published rules. Three outcomes:

1. Upheld. The reviewer agrees with you, the decision is overturned, gross status restored. No tribunal needed.
2. Dismissed. The reviewer agrees with the original decision. You then have 45 days from the review conclusion letter to appeal to the Tribunal. If you don't, the cancellation takes effect.
3. Withdrawn (you accept). If you choose not to push to Tribunal after a dismissed review, the status of your appeal changes to "Withdrawn" and the 12-month re-application clock starts.

How to request: write to HMRC at the address on the CIS308 notice within the 30-day window, stating you want an internal review and explaining (concisely) why the decision is wrong. Attach evidence — the receipted late payment that wasn't actually late, the Time-to-Pay agreement that covered the period, the bank statement showing the SA paid on time. The reviewer typically responds in 30–45 days.

Appeal route 2 — First-tier Tribunal

The Tribunal is independent of HMRC and can overturn a decision on either factual or "reasonable excuse" grounds. Available routes:

• Skip internal review and go straight to Tribunal. Allowed — the 30-day appeal deadline applies in either direction. Best when the dispute is more about reasonable excuse than HMRC getting the facts wrong.
• Tribunal after a dismissed internal review. You have 45 days from the review conclusion letter to lodge the Tribunal appeal.

The Tribunal is free to file — you don't need a representative, though a tax adviser or solicitor improves your chances on complicated cases. Hearings happen in writing or by video for most cases at the basic and standard categories; an in-person hearing is available if you ask. Decisions normally take 3–6 months from the original appeal lodgement.

What "reasonable excuse" actually means

Tribunals consistently accept these reasonable-excuse arguments for individual late payments or filings:

• Bereavement of a partner or close family member around the deadline
• Serious illness of the subbie or a dependant (with medical evidence)
• HMRC system outage on the actual deadline day, evidenced by the gov.uk service status page
• Postal disruption for paper filings — major strike action or documented delivery failure
• Severe weather preventing access to records or the bank for a one-off payment
• Crime — theft of records or a cyber attack inside the deadline window

Tribunals consistently reject:

• Cashflow problems. Inability to pay isn't a reasonable excuse — Time to Pay is the route, not silence.
• Accountant errors. The taxpayer is responsible for filings and payments, not their adviser. Sue the adviser separately.
• "I forgot" or "I was too busy." No matter how busy.
• HMRC reminders not received. Reminders are a courtesy. The legal obligation to file and pay isn't conditional on a reminder.
• Address mistakes. Keeping HMRC informed of your current address is the taxpayer's responsibility.

If you can't appeal — re-applying

If the appeal routes are closed (deadlines missed, both reviews upheld the cancellation, or you decide not to fight), the path back to gross status is:

1. Wait 12 clean months from the cancellation date. File and pay everything on time during that window — Self Assessment, VAT, PAYE, CIS as a contractor, the lot. The new 12-month clock is the compliance test for the re-application.
2. Sort the underlying issue. If you lost gross because a director was sloppy on personal SA, restructure how that gets done. If a missing CIS monthly return was the cause, set up reminders. The re-application is going to fail again if the original cause hasn't been removed.
3. Re-apply via the same form. CIS302 (sole trader), CIS305 (Ltd Co.) or CIS304 (partnership) — same process as the original application. HMRC will weight the previous cancellation in their decision: a clean 12 months and evidence of the cause being fixed gets you back in.

While you're back at 20%

Losing gross status doesn't change how much tax you owe — it changes the timing. Practical implications during the 20% period:

• Cashflow drops by ~20% on every invoice. A subbie invoicing £8,000/month gross loses £1,600/month to CIS at source. Plan the working capital before the change kicks in, especially if you've been buying materials on the float that gross status gave you.
• Year-end refund usually swings the other way. Your Self Assessment will likely show a refund — HMRC will have held more than your eventual liability. File early in the new tax year to claw it back fast.
• Class 4 NI position. CIS deductions don't cover Class 4 NI. The under-deduction at year-end is sometimes a surprise — set aside ~9% of profits over the personal allowance even though "tax is being deducted at source".
• Materials. CIS deductions are on labour only — if you're consistently invoicing labour + materials, the headline 20% effective rate is lower against your gross turnover. Keep the materials apportionment clean on every invoice so the contractor deducts correctly.

Checklist for the next 12 months

The discipline that gets gross status back:

1. Set every HMRC deadline as a recurring calendar event with a 7-day pre-warning.
2. If you employ anyone or run RTI, run a monthly check that the previous month's submission filed and PAYE/NI cleared.
3. If you're VAT-registered, file the quarterly return on day 1 of the file-and-pay window — don't park it.
4. If you also pay subbies, file the CIS300 monthly return by the 19th of the following month, even nil months.
5. For Ltd Cos., run a quarterly check on every director's personal SA position — the company's status hangs on it.
6. If a payment is going to be late, contact HMRC before the deadline and agree Time to Pay. That keeps the compliance record clean.
7. Diary the 12-month re-application date the day the cancellation lands — apply on day 366 with a clean record.