CIS Subcontractor Verification: How It Works

Summary

Verification is the specific administrative step inside the Construction Industry Scheme that determines how much tax a contractor deducts from a subcontractor's labour payment. It sits between "I've agreed to hire this subcontractor" and "I'm making the first payment" — and it's not optional. A contractor who pays a subcontractor without verifying them first, or who simply takes the subcontractor's word for their CIS status, is exposed to HMRC recovering the shortfall from the contractor if the deduction turns out to have been wrong.

The mechanics are simple once you've done it a few times, but the terminology causes confusion. HMRC's verification service doesn't return a plain "yes registered, no not registered" answer — it matches the details you supply (UTR, name, NI number or company number) against its own records and returns a status: the subcontractor is matched and gross, matched and net (standard rate), or the details don't match anything HMRC holds, in which case they're treated as unmatched and taxed at the higher 30% rate. That last outcome catches out a lot of new contractors who assume a failed match means they've made a typing error — sometimes it does, but it can equally mean the subcontractor genuinely isn't registered, or has given a UTR that doesn't belong to them.

This article covers the practical mechanics of running a CIS verification — what information you need, how to do it online and by phone, how to read the result, and exactly what has to happen before that first payment goes out. For the CIS deduction rates, the labour/materials split, and the monthly return cycle that follows verification, see cis construction industry scheme. For the wider paperwork trail (insurance, contracts, CDM duties) when taking on subcontractors, see managing subcontractors.

Key Facts

• Verification is mandatory before the first payment to any new subcontractor under CIS-scope work — there is no grace period or "verify later" option
• Three possible outcomes — gross payment status (0% deduction), registered/net status (20% deduction), unmatched/not registered (30% deduction)
• Information required to verify — the subcontractor's UTR (Unique Taxpayer Reference); their legal trading name (sole trader) or registered company name and Company Registration Number (limited company); and, for sole traders, their National Insurance number
• Verification is done as the contractor, using your own Government Gateway business tax account enrolled for CIS — not by the subcontractor on their own behalf
• Online verification — via the CIS online service in your HMRC business tax account; the result is returned immediately in most cases
• Telephone verification — via HMRC's CIS helpline (0300 200 3210) for contractors who can't verify online, or for a small number of subcontractors before online registration
• A verification reference number is issued with every result — record it against the subcontractor's file; you may need to produce it if HMRC queries a deduction rate later
• No UTR provided usually means 30% — HMRC treats a subcontractor who cannot supply a UTR as unmatched, and a National Insurance number is not an acceptable substitute for verification purposes
• Re-verification isn't needed every time — if you've included the subcontractor on a CIS return in the current tax year or either of the two previous tax years, you don't need to re-verify before paying them again
• Re-verify if HMRC notifies a status change, or if the subcontractor tells you their gross payment status has changed — don't rely on a subcontractor's self-report without checking
• Verifying doesn't decide employment status — a correctly verified CIS subcontractor can still, in reality, be an employee under separate employment-status tests; verification is a tax-deduction-rate check, nothing more
• Getting it wrong is the contractor's liability — if you pay net or gross without a valid verification (or on an out-of-date one) and it turns out the rate should have been higher, HMRC can pursue the contractor for the shortfall
• Gross payment status can be withdrawn — HMRC reviews GPS holders annually; a subcontractor who told you last year they were gross may not be gross this year, which is exactly why the re-verification triggers above matter

Quick Reference Table

Detailed Guidance

Step 1 — Register as a contractor before you take anyone on

You cannot verify a subcontractor, or operate CIS at all, without first being registered as a contractor yourself. This is done through your Government Gateway account, enrolling for CIS as a contractor. If your business already pays PAYE staff, this is a separate enrolment from your PAYE scheme — having a PAYE reference doesn't automatically give you CIS contractor access. Do this before you agree terms with your first subcontractor, since verification (and therefore the first payment) can't happen without it.

Step 2 — Gather the right details from the subcontractor

Before you can verify, you need, at minimum:

• The subcontractor's UTR — a 10-digit reference issued by HMRC when someone registers for Self Assessment or Corporation Tax
• Their legal name exactly as registered — a trading name that differs from the legal name on record can cause a false non-match
• For a sole trader: their National Insurance number
• For a limited company: the Company Registration Number from Companies House

A subcontractor who can't produce a UTR at all is the clearest warning sign — it usually means they've never registered with HMRC for this purpose, and verification will return unmatched, meaning 30% deduction, regardless of anything else about their business.

Step 3 — Run the verification

Online (the standard route): log into your HMRC business tax account, go to the CIS section, and use "verify a subcontractor." Enter the details gathered in Step 2. In most cases the result — gross, net, or unmatched — is returned immediately, along with a verification reference number.

By telephone: call HMRC's CIS helpline (0300 200 3210) if you're unable to verify online, or in the small number of cases where phone verification is still the appropriate route. The same information is required, and the same three outcomes apply.

Step 4 — Read the result correctly

The verification returns one of three outcomes, and each has a direct, mechanical consequence for how you pay:

1. Gross — pay the subcontractor's invoice in full, with no CIS deduction. They are responsible for settling all their own tax through Self Assessment or Corporation Tax.
2. Net (registered, standard rate) — deduct 20% from the labour element of the invoice (never from materials, VAT, or qualifying plant hire — see cis construction industry scheme for the labour/materials split) and pay the balance.
3. Unmatched (not registered, or details don't match) — deduct 30% from the labour element. This is the default outcome whenever HMRC cannot match the details you've supplied to a record on file, whether that's because the subcontractor genuinely isn't registered or because something in the details (name, UTR, NI number) doesn't line up.

Record the verification reference number and the date against the subcontractor's file for every verification you run — this is your evidence if HMRC later queries the rate you applied.

Step 5 — Know when you don't need to re-verify

You don't need to verify a subcontractor again before paying them if you've already included them on a CIS return within the current tax year or either of the two previous tax years. This is designed to avoid re-running the check on every single payment to an established subcontractor you use regularly.

You do need to re-verify if:

• This is a genuinely new subcontractor you haven't paid and returned before
• You haven't paid (and therefore haven't returned) this subcontractor for more than two tax years
• HMRC notifies you directly that a subcontractor's status has changed
• You have reason to doubt the status you're currently applying — for example, a subcontractor tells you they now hold gross payment status but you haven't independently confirmed it

Never take a subcontractor's word for a status change without checking. Gross payment status is reviewed annually by HMRC and can be withdrawn with 90 days' notice if compliance slips — a subcontractor may genuinely not realise their own status has changed since you last paid them.

What must happen before the first payment — the full sequence

Verification is one step in a short, ordered sequence, and skipping the order creates problems:

1. Register as a contractor with HMRC (once, before your first subcontractor)
2. Agree terms with the subcontractor and collect their UTR, legal name, and NI number/CRN
3. Verify the subcontractor with HMRC and record the result and reference number
4. Apply the correct deduction rate (0%, 20% or 30%) to the labour element only
5. Pay the net amount (or gross, if verified gross)
6. Issue a payment and deduction statement to the subcontractor within 14 days of the end of the tax month
7. Include the payment on your monthly CIS return, filed by the 19th of the following month, and pay over any deductions to HMRC

Steps 3 and 4 are the ones this article focuses on, but they only work correctly if steps 1 and 2 have already happened — you cannot verify a subcontractor whose UTR you haven't collected, and you cannot legally operate any of this without your own contractor registration in place first.

What happens if you get verification wrong

If a contractor pays a subcontractor at a lower rate than they should have (for example, paying gross when the subcontractor was actually only entitled to net status, or paying net without ever verifying at all), HMRC can hold the contractor liable for the shortfall — the difference between what should have been deducted and what actually was. This is a real financial exposure, not just a paperwork breach, which is why skipping verification "because the subcontractor seems legitimate" or "because we've worked with them before on a different job" is a genuine risk rather than a shortcut.

Frequently Asked Questions

What if the subcontractor's details don't match on verification?

Double-check for simple errors first — a trading name entered instead of the legal registered name, a transposed digit in the UTR, or a maiden/former name mismatch are common causes of a false unmatched result. If the details are definitely correct and it still comes back unmatched, the subcontractor is not registered with HMRC for CIS in the way they've claimed, and you must deduct 30% until that's resolved. Ask the subcontractor to check their own registration status directly with HMRC before assuming the fault is on your side.

Can the subcontractor tell me their own CIS status instead of me verifying?

No — and you shouldn't rely on it even if they do. Verification has to be run by the contractor through HMRC's own service; a subcontractor's claim about their status (including a claim of gross payment status) is not evidence you can act on. Always verify directly, and keep the reference number as your record.

Do I need to verify a subcontractor I've used for years?

Not before every single payment, provided you've included them on a CIS return within the current tax year or the two previous tax years — in that case you continue at the last confirmed rate. You do need to re-verify if there's been a gap of more than two tax years since you last paid and returned them, or if HMRC notifies you of a status change.

What if a subcontractor has no UTR at all?

Treat this as a serious flag before agreeing to take them on. Without a UTR, verification cannot return anything other than unmatched, meaning a mandatory 30% deduction — and it also suggests the individual or business may not be correctly registered with HMRC for tax purposes more broadly. A National Insurance number on its own is not an acceptable substitute for a UTR in the verification process.

Does CIS verification apply to work for domestic customers?

No. CIS, and therefore verification, only applies where the party paying for the work is itself a contractor for CIS purposes — a business in construction, or a business that meets HMRC's "deemed contractor" spend threshold on construction work. A homeowner paying a builder directly for work on their own home is not a contractor and does not verify or deduct CIS.

Regulations & Standards

• Finance Act 2004, Chapter 3 — the primary legislation establishing the Construction Industry Scheme, including the verification requirement

• Income Tax (Construction Industry Scheme) Regulations 2005 — the detailed statutory instrument governing verification, deduction rates, returns and payment/deduction statements

• HMRC CIS340 — the official Construction Industry Scheme guide for contractors and subcontractors, including the verification process

• Finance Acts (annual) — periodically amend CIS thresholds and the gross payment status tests referenced during verification

• GOV.UK — Verify a subcontractor — the official verification process for contractors

• GOV.UK — Construction Industry Scheme (CIS) — scheme overview for contractors and subcontractors

• GOV.UK — CIS: a guide for contractors and subcontractors (CIS340) — the detailed HMRC guide covering verification in full

• GOV.UK — Register as a CIS contractor — contractor registration ahead of verifying subcontractors

• cis construction industry scheme — CIS deduction rates, the labour/materials split, and the monthly return cycle that follows verification

• managing subcontractors — the wider paperwork trail (contracts, insurance, CDM duties) for taking on subcontractors, including a summary verification table

• cis tax explained — how CIS deductions are reclaimed by the subcontractor through Self Assessment

• cis vs paye employed subcontractors — why CIS status and employment status are separate questions