CCCIS Comply

CIS guide

CIS verification: how to verify a subcontractor with HMRC

Before you pay a subcontractor under the Construction Industry Scheme you have to verify them with HMRC. The result tells you whether to deduct 0%, 20% or 30% CIS tax. Here's exactly how the process works and what you have to keep on file.

CIS Comply is a record-keeping tool. It does not file returns with HMRC or replace professional accountancy advice. Always verify subcontractors directly with HMRC and consult a qualified accountant.

Why verification exists

CIS verification is HMRC's mechanism for telling you, the contractor, how much tax to withhold from a subcontractor's invoice. It also stops unregistered traders from working under the scheme without HMRC knowing about them. You verify before the first payment, not after.

What you need to verify a subcontractor

  • Your own Unique Tax Reference (UTR) and Accounts Office reference
  • The subcontractor's trading name (exactly as registered with HMRC)
  • The subcontractor's UTR
  • For companies: the company registration number
  • For sole traders: National Insurance number

The three CIS deduction rates

HMRC returns one of three statuses:

  • 0% — Gross payment status. The subcontractor handles their own tax. They have to apply for this and pass a turnover and compliance test.
  • 20% — Standard rate. The subcontractor is registered for CIS and matched to HMRC's records.
  • 30% — Higher rate. The subcontractor is not registered, or the details you gave do not match HMRC's records.

Apply the rate HMRC returns to the labour element of the invoice (gross minus materials). The deduction is paid over to HMRC as part of your normal PAYE/CIS payment.

How to verify with HMRC

  1. Sign in to the CIS Online service with your Government Gateway ID.
  2. Select Verify subcontractor.
  3. Enter the subcontractor's name, UTR and (for companies) CRN.
  4. HMRC returns a verification reference, e.g. V1234567890A, and the deduction rate.
  5. Record both the reference and the rate — you need them on every monthly return and at audit.

When you have to re-verify

You don't have to re-verify a subcontractor on every payment. HMRC's rule is simple: if you've included them on a monthly return in the current tax year or either of the two previous tax years, you don't need to verify again. If there has been a gap longer than that, verify before the next payment.

A change of trading status (sole trader becoming a limited company, for example) always counts as a new subcontractor — verify the new entity before paying it.

What happens if you don't verify

Paying an unverified subcontractor without deducting 30% is a CIS compliance failure. HMRC can recover the tax that should have been deducted directly from you, plus interest and penalties. Verification evidence is one of the first things HMRC asks for in a CIS audit.

Frequently asked questions

What is CIS verification?

CIS verification is the process of checking a subcontractor's status with HMRC before you pay them, so HMRC can tell you whether to deduct 0%, 20% or 30% tax. HMRC returns a verification reference (e.g. V1234567890A) you must keep on file.

Do I have to verify every subcontractor every time I pay them?

No. You only need to re-verify a subcontractor if you have not included them on a CIS return in the current or two previous tax years. New subcontractors must always be verified before their first payment.

What does the verification result mean?

HMRC will return one of three deduction rates: 0% (gross payment status — the subcontractor pays their own tax), 20% (standard rate — registered for CIS) or 30% (higher rate — not registered or unable to be matched).

What if HMRC can't match the subcontractor?

If HMRC cannot verify the subcontractor against their records, you must deduct CIS tax at the higher 30% rate. You should also recheck the UTR and trading name you supplied — a typo is the most common cause.

How long do I keep verification records?

Like the rest of your CIS records, verification references must be retained for at least 3 years after the end of the tax year. Auditors routinely ask for the verification reference for each subcontractor on a monthly return.

Get this off your plate

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