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HMRC internal manual

Construction Industry Scheme Reform Manual

HM Revenue & Customs
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The Scheme: subcontractors: verifying subcontractors

When a subcontractor begins work for a new contractor, the contractor must be satisfied that the contract between them is one of self-employment. The contractor will usually then have to contact HMRC to ‘verify’ the subcontractor. Verification enables the contractor to

  • check that the subcontractor is registered for CIS, and
  • find out whether they must pay the subcontractor gross or under deduction.

There are times when the contractor does not need to verify a subcontractor, such as where they have already worked for that contractor in the current or previous two tax years, or where they have already been verified by another company within the contractor’s group.

On contacting HMRC, where a subcontractor needs to be verified, the contractor will be told to pay the subcontractor gross, if HMRC has previously accepted the subcontractor’s application for gross payment. Alternatively, the contractor will be told to make a deduction from the subcontractor’s payment at the standard rate, after allowing for the cost of any materials incurred by the subcontractor.

Where HMRC cannot trace the subcontractor’s record, perhaps because they have not registered for CIS or have given the wrong details to the contractor, the contractor will be told to make a deduction at the higher rate from the subcontractor’s payments.

Further information on the verification process is contained at CISR50000.