CIS Verification Tool

Before you make a first payment to a subcontractor under the Construction Industry Scheme, you must verify them with HMRC. Verification tells you which deduction rate to apply — 0% for subcontractors with gross payment status, 20% for those registered and matched on HMRC's records, and 30% for anyone HMRC cannot match. Getting this wrong is expensive in both directions: under-deduct and you are liable for the shortfall yourself, over-deduct and you damage the subcontractor's cash flow and may have to correct returns. Verification is not a one-off chore either — it lapses, and paying a lapsed subcontractor at their old rate is one of the most common CIS errors HMRC picks up. Once you know the rate, work out what to withhold with the CIS deductions calculator.

Scenario: a contractor is about to make a first payment to a new limited-company subcontractor.

What you need before you start: - The subcontractor's Unique Taxpayer Reference (UTR) - Their name, exactly as registered with HMRC - For a limited company: the company registration number - For a partnership: the partnership name and partnership UTR

The three possible outcomes: 1. Matched, gross payment status → deduct 0%, pay the invoice in full 2. Matched, registered for net payment → deduct 20% from the labour element 3. Not matched → deduct 30% from the labour element

On a £4,000 labour-only invoice the difference is stark: £0, £800, or £1,200 withheld. If HMRC cannot match the subcontractor, the verification reference comes back with a letter appended and you must pay at the higher rate — record that reference on your monthly CIS return.

Keep the reference. It is your evidence for the rate you applied if HMRC later queries the payment.

Verification fails on small mismatches more often than on genuine non-registration, so get the details exactly right before you submit:

• UTR — the subcontractor's 10-digit Unique Taxpayer Reference
• Name — as held by HMRC, not the trading name on the invoice
• Company registration number — for limited companies
• Partnership name and UTR — for partnerships, in addition to the partner's own details

A sole trader who has registered for CIS but gives you a trading name rather than their own name will frequently come back unmatched, which forces the 30% rate. It is worth a phone call to confirm the exact registered details before you submit rather than deducting an extra 10% and having to unwind it.

A verification is valid for the tax year in which you carry it out plus the two following tax years, as long as you continue to include that subcontractor on your monthly returns. If a subcontractor drops off your returns for the current and the previous two tax years, you must verify them again before the next payment.

This catches contractors out with seasonal or occasional subcontractors: a trusted subcontractor used once every few years is not covered by the verification you did the last time they worked for you. HMRC can also tell you that a subcontractor's status has changed — gross status can be withdrawn — so treat any HMRC notification about a subcontractor as a trigger to re-check the rate you are applying.

Get advice if a subcontractor insists they hold gross payment status but HMRC returns an unmatched result, if HMRC has withdrawn gross status and you are unsure how to handle payments already made, or if you have been applying the wrong rate and need to correct past returns. Correcting historic CIS errors involves amended returns and, where you have under-deducted, potential liability for the tax you failed to withhold — an accountant will usually cost less than the exposure.