How do I verify a subcontractor under CIS?

If you work in the construction industry the CIS rules can feel like a maze, and one of the first hurdles every contractor faces is verifying a subcontractor. In my opinion this is the point in the process where mistakes are most likely because many businesses assume verification is optional. It is not. Before you pay a subcontractor you must check their status with HMRC so you know whether to pay them gross, apply the standard deduction or, in some cases, apply the higher rate. Getting this wrong does not just affect the subcontractor. It exposes the contractor to penalties, interest and possible compliance reviews.

This guide explains how to verify a subcontractor under the Construction Industry Scheme, what information you need, how the verification process works in practice, what to do when HMRC gives you a higher deduction rate and how to avoid the common errors that hold up payments. My aim is to give you a clear understanding so you can verify subcontractors confidently and stay fully compliant.

Why subcontractor verification matters

The entire purpose of CIS is to make sure tax is collected correctly on payments made to subcontractors. HMRC treats contractors as the gatekeepers in this system. If you pay someone without verifying them you have no evidence that you applied the correct deduction rate. HMRC can then say you should have withheld tax, and that can leave you financially responsible for the amount that should have been deducted.

Verification also protects the subcontractor. If their details are incorrect or their tax status has changed, verification ensures they are deducted at the correct rate so they do not lose more cash than necessary. In my opinion the verification step is the foundation of the entire CIS process.

What you need before you verify a subcontractor

To verify someone you need the subcontractor’s basic details. For an individual that means their name, address, date of birth, Unique Taxpayer Reference and National Insurance number. For a company you need the business name, the company registration number, the UTR and the trading address. HMRC uses these details to match the subcontractor against their records.

It is good practice to collect this information as part of your onboarding process rather than chasing for it later. Many contractors also ask for ID or company documents to ensure they are dealing with the correct entity. You cannot rely on trading names or informal arrangements. HMRC verifies against legal identities.

How the CIS verification process works

Once you have the subcontractor’s details you verify them using HMRC’s online CIS service or through accounting software that integrates with HMRC. The process is straightforward. You enter the subcontractor’s details, submit the request and HMRC responds almost instantly with the deduction rate you must use.

HMRC will return one of three outcomes. The subcontractor may be paid gross with no deduction. They may be paid at the standard rate of twenty percent. Or they may be assigned the higher rate of thirty percent. The system gives you a verification number which you should keep on record. This number is your evidence that the verification was done.

In my experience the verification itself is quick. The delays usually arise from incorrect details or mismatches in HMRC’s records.

Why HMRC sometimes applies the higher rate

Contractors often worry when a subcontractor returns at the higher rate but it is not a reflection on you. It simply means HMRC could not match the subcontractor to their records or that the subcontractor does not meet the criteria for gross or standard payments.

Common reasons include incorrect or missing UTR numbers, recent registration, inactivity on the tax record or compliance issues at the subcontractor’s end. The key point is that you must apply the higher rate unless HMRC later confirms a change. You cannot choose to pay at twenty percent because your subcontractor insists their details are correct.

In my opinion clarity helps here. It is always best to explain to subcontractors that the deduction rate is issued by HMRC and cannot be overridden without an updated verification.

Do you need to verify every subcontractor every month?

You only need to verify new subcontractors or existing subcontractors whose details have changed or who have not been paid in the current or previous two tax years. For active subcontractors you do not verify them every month. You simply continue applying their latest verified rate.

Although this rule sounds simple, contractors sometimes trip up by treating someone as new when they are not or failing to keep proper records. A good system for tracking subcontractors helps avoid unnecessary verifications.

What to do after verification

Once you have verified the subcontractor and received the deduction rate you simply calculate CIS on each payment you make. You must show the deduction on their payment statement and pay the deducted tax to HMRC with your CIS return. Your records must show the gross amount, materials, labour and the deduction taken.

If the subcontractor was verified for gross payment you still include them on your monthly CIS return. You just do not deduct anything from the payment.

In practice the verification number should be stored with your CIS records. If HMRC ever asks why you used a certain deduction rate the verification number is your proof that you followed the correct process.

What happens if you forget to verify

If you pay a subcontractor without verification HMRC assumes you should have deducted thirty percent. If you deducted less you may be required to pay the shortfall yourself. This can create cash flow problems for contractors, especially if the subcontractor is no longer available to repay the difference.

In my view this risk alone makes verification essential. It takes seconds and protects you from potentially expensive assessments later.

Final thoughts

Verifying a subcontractor under CIS is a straightforward step but it is one you cannot skip. HMRC requires it to ensure the correct deduction rate is used and it protects you from being held responsible for taxes that should have been withheld. The key is collecting the right details, verifying them through the official HMRC portal or compliant software and keeping a record of the verification number.

In my opinion CIS compliance becomes far less stressful once you have a clear onboarding process that includes verification as standard. With the right system in place you can pay subcontractors confidently, avoid penalties and maintain a clean record with HMRC.