How do I verify a subcontractor under CIS?

At Towerstone Accountants we provide specialist CIS accountancy services for contractors, subcontractors, and construction businesses across the UK. We created this webpage for people working in construction who want clear guidance on CIS deductions, refunds, verification, and monthly return responsibilities, without jargon. Our aim is to help you stay compliant with HMRC, avoid penalties, and keep your cash flow and records under control.

Verifying a subcontractor under the Construction Industry Scheme is one of those tasks that sounds simple on paper but causes a surprising amount of confusion in practice. I see it regularly with new contractors setting up for the first time, established businesses taking on a new subcontractor at short notice, or companies that have always relied on someone else to handle CIS and suddenly find the responsibility landing on their desk.

Verification is not optional and it is not a courtesy check. It is a legal requirement placed firmly on the contractor, and getting it wrong can lead to incorrect deductions, unhappy subcontractors, and penalties from HMRC. The good news is that once you understand how verification works and why it matters, it becomes a routine part of your monthly process rather than something to worry about.

In this article I want to explain clearly how to verify a subcontractor under CIS, what information you need, when verification must be done, how HMRC responds, and what to do if something goes wrong. I will explain this from a practical real world perspective, based on how CIS actually operates day to day rather than how it is sometimes described in guidance.

What CIS verification actually means

CIS verification is the process of checking a subcontractor’s status with HMRC before you pay them for construction work. When you verify a subcontractor HMRC confirms whether they are registered for CIS and what deduction rate you must apply.

This verification tells you one of three things

• The subcontractor should be paid gross with no deduction

• The subcontractor should have tax deducted at 20 percent

• The subcontractor should have tax deducted at 30 percent

You as the contractor do not choose the rate and you cannot rely on what the subcontractor tells you verbally. The rate comes directly from HMRC and you are legally required to follow it.

This is why verification matters so much. If you apply the wrong rate the responsibility sits with you.

When you must verify a subcontractor

You must verify a subcontractor before you make the first payment to them under CIS. This is not something you can do afterwards and it is not something that can be skipped even if you have worked with them informally before.

Once a subcontractor has been verified you do not need to verify them again for every payment, provided their details do not change and you continue to pay them under the same business.

However if there is a break in the working relationship, a change in business structure, or uncertainty around details, it is sensible to verify again.

I always advise contractors to treat verification as part of onboarding, just like collecting bank details or agreeing rates.

Who needs to be verified under CIS

Verification applies to subcontractors who carry out construction work and are not paid through PAYE as employees.

This includes

• Sole traders

• Partnerships

• Limited companies acting as subcontractors

• Labour only subcontractors

It does not apply to employees, material only suppliers, or certain professional services that fall outside the definition of construction operations.

Understanding whether someone is a subcontractor in the first place is a separate question, but once they are within CIS verification is mandatory.

What information you need to verify a subcontractor

To verify a subcontractor you need specific information. Without it HMRC cannot confirm their status and you may be forced to deduct tax at the higher rate.

For a sole trader or individual subcontractor you will need

• Full legal name

• Unique Taxpayer Reference

• National Insurance number

For a limited company subcontractor you will need

• Company name

• Company Unique Taxpayer Reference

• Company registration number

For partnerships the details can be slightly more involved, but the principle is the same.

One of the most common problems I see is contractors being given incomplete or incorrect information, often a UTR with digits missing or a personal UTR provided instead of a company UTR.

If the details do not match HMRC records verification will fail.

Why you should verify before work starts

Technically you must verify before the first payment, but in practice I strongly recommend verifying before work starts.

This avoids awkward conversations later when a subcontractor is expecting full payment and you discover HMRC requires you to deduct 30 percent.

Verifying early also gives the subcontractor time to resolve any registration issues with HMRC before money is involved.

From experience this simple step prevents most CIS disputes.

How to verify a subcontractor online

The most common and efficient way to verify a subcontractor is through HMRC online services.

If you are registered as a contractor for CIS and have a Government Gateway account you can log in and use the CIS verification service.

The process involves

• Logging into your HMRC online account

• Selecting the CIS section

• Choosing the option to verify a subcontractor

• Entering the subcontractor’s details

• Submitting the verification request

HMRC usually responds immediately with the subcontractor’s deduction status.

This response should be saved or recorded because it forms part of your compliance evidence.

Verifying multiple subcontractors at once

If you are verifying several subcontractors you can verify them individually or in batches depending on your software or HMRC interface.

Many payroll and CIS software systems allow batch verification, which is particularly useful for contractors with a large workforce.

Regardless of method the underlying requirement is the same, each subcontractor must be verified before payment.

What HMRC’s verification response means

When HMRC responds to a verification request it will confirm the subcontractor’s status and the rate of deduction you must apply.

If HMRC confirms gross payment status you must pay the subcontractor in full without deduction.

If HMRC confirms standard registration you must deduct 20 percent from the labour element of their payment.

If HMRC cannot match the subcontractor to a CIS registration you must deduct 30 percent.

This response is binding. Even if the subcontractor insists the rate is wrong you must follow HMRC’s confirmation until it is corrected.

What to do if verification results in 30 percent deduction

A 30 percent deduction usually means the subcontractor is not registered for CIS or the details provided do not match HMRC records.

This can be stressful for subcontractors but from a contractor’s point of view there is no flexibility.

You should inform the subcontractor of the result and advise them to contact HMRC to resolve their registration. Once HMRC updates their records you can verify them again and apply the correct rate going forward.

You cannot refund 30 percent deductions retrospectively through CIS. Any over deduction is reclaimed by the subcontractor through their tax return.

Verifying subcontractors by phone

It is also possible to verify subcontractors by phone by calling the CIS helpline, although this is less common now and often slower.

Phone verification can be useful if online services are unavailable or if there is a complex issue that needs discussion.

You will still need the same subcontractor details and you should keep a record of the call and outcome.

Verification and limited company subcontractors

Limited company subcontractors must be verified using the company’s details, not the director’s personal details.

This is a very common error. I regularly see contractors verify the director as an individual rather than the company, which leads to incorrect deductions and reporting.

If you are paying a limited company you must use the company UTR and company name exactly as registered with HMRC.

How long verification lasts

Once a subcontractor is verified the verification remains valid for as long as you continue to pay them under the same business arrangement.

You do not need to re verify every month.

However if the subcontractor changes business structure, for example moving from sole trader to limited company, you must treat the new entity as a new subcontractor and verify again.

Similarly if HMRC withdraws gross payment status you may not be notified directly, so periodic checks are sensible for long term subcontractors.

What happens if you fail to verify a subcontractor

Failing to verify a subcontractor can lead to several problems.

HMRC may treat the subcontractor as unverified and expect 30 percent deductions. If you have paid without deducting tax HMRC may pursue you for the under deducted amount.

Penalties can also be charged for incorrect CIS returns or failures in compliance.

In addition disputes with subcontractors can arise if deductions are applied incorrectly later.

Verification protects both you and the subcontractor when done properly.

Verification and monthly CIS returns

Verification and monthly CIS returns are closely linked but they are not the same thing.

Verification determines the deduction rate. The monthly CIS return reports what you actually paid and deducted.

If verification is wrong the monthly return will also be wrong, which compounds the issue.

This is why I always stress getting verification right first.

Record keeping for CIS verification

HMRC expects contractors to keep records of CIS verification. This includes

• Subcontractor details

• Verification confirmation from HMRC

• Dates verification was carried out

These records should be kept alongside CIS payment records and deduction statements.

Good record keeping makes HMRC checks far less stressful.

Common mistakes I see with CIS verification

There are a few recurring mistakes I see in practice.

One is verifying after payment rather than before. Another is using incorrect UTRs or mixing up personal and company details.

I also see contractors assume that because a subcontractor worked for them years ago verification is not needed again, which can be risky.

Finally some contractors rely on subcontractors telling them their rate rather than verifying it themselves.

All of these mistakes are avoidable with a simple process.

How software helps with verification

Good CIS software can streamline verification by prompting you to verify before payments are processed and flagging missing details.

Many systems also store verification results so you can evidence compliance easily.

While software is not mandatory it significantly reduces human error, especially for contractors with multiple subcontractors.

What to do if a subcontractor disputes the verification result

If a subcontractor disputes the verification result the key thing is to remain calm and factual.

Explain that the rate comes directly from HMRC and you are required to apply it. Encourage them to contact HMRC to resolve their registration.

Once HMRC updates their status you can verify again and apply the new rate going forward.

Trying to override the result or agree a different rate exposes you to risk.

My experience verifying subcontractors in practice

From my experience verification becomes routine very quickly once a process is in place. The stress usually comes from last minute onboarding or incomplete information.

Contractors who verify early and keep clear records rarely have issues. Those who rush or rely on assumptions often end up dealing with penalties or disputes.

Verification is one of those tasks that feels administrative but carries real financial consequences if ignored.

Preventing problems with a simple CIS process

I usually recommend contractors adopt a simple CIS checklist

• Confirm the worker is a subcontractor

• Collect full and accurate details

• Verify with HMRC before payment

• Record the verification result

• Apply the confirmed deduction rate

• Report correctly on the monthly CIS return

Following this consistently prevents the majority of CIS problems I see.

Final thoughts from experience

So how do you verify a subcontractor under CIS, by collecting the right details, checking them with HMRC before payment, applying the confirmed rate without exception, and keeping clear records.

Verification is not complicated but it is essential. It protects you from under deductions penalties and protects subcontractors from incorrect treatment.

Once it becomes part of your routine it stops being something to worry about and starts being just another box ticked properly, which in construction and tax is often half the battle won.

You may also find our guidance on What happens if I pay a subcontractor without verifying them and How do I file monthly CIS returns helpful when dealing with related CIS questions. For a broader overview of CIS rules, compliance, and support, you can visit our cis guidance hub.