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HMRC internal manual

Construction Industry Scheme Reform Manual

The Scheme: overview: making scheme payments to subcontractors with gross payment status


Just because someone holds gross payment status it does not automatically follow that they are self-employed. It is the contractor’s responsibility to establish whether, inrelation to a particular job or contract, the person is employed or self-employed. If the subcontractor is employed, the PAYE system must be operated. The contractor should consult the CIS Helpline or the HMRC website if there is any doubt.

Before a contractor makes a payment to a subcontractor without deduction, the contractor must decide whether the verification process needs to be undertaken in order to determine what payment status may be used in paying the subcontractor. The Verification process is explained in detail at CISR50000 onwards.

Failure to make the necessary checks may result in the contractor becoming liable for the deductions that should have been made and/or the withdrawal of the contractor’s own gross payment status (where the contractor has gross payment status as a subcontractor).

If the contractor determines that verification is necessary, this process should be undertaken to confirm the payment method that must be used in paying the subcontractor.

Where verification was not necessary, payment may be made without deduction but only where this was how the subcontractor was paid last time and there has been no notification from HMRC since then stating that payments to this particular subcontractor must now be made under deduction.