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HMRC internal manual

Construction Industry Scheme Reform Manual

Verify subcontractor: overview: introduction


CISR51600 Action guide contents

Before making a first payment to a subcontractor the contractor must confirm that the subcontractor is known to HMRC, and registered within CIS and obtain details of their payment status. This process is known as ‘verifying the subcontractor’. The following modules are provided to explain the verification process and how you deal with specific cases.

All subcontractors working within the UK and involved in construction operations that fall within CIS should be ‘registered’ if they don’t want deductions made from their payments at the higher rate. See CISR42000 onwards for more detail on the process of registration.



Before making a first payment to a subcontractor the contractor must contact HMRC to ‘verify the subcontractor’. This is necessary so the contractor may find out from HMRC whether or not a deduction should be made from the subcontractor’s payment and, if so, at what rate. Thereafter, the contractor only needs to re-verify the subcontractor if they have not paid the same subcontractor within the current, or two previous, tax years. Essentially this means that provided payments continue a contractor may pay the subcontractor using the same payment status, (Gross, at the standard rate of deduction, or at the higher rate of deduction) for an indefinite period unless otherwise advised by HMRC.

A contractor or their appropriate representative can contact HMRC to carry out verification using a number of different methods, namely by:

  • Telephone
  • Internet - using the Government Gateway
  • Letter

The contractor’s appropriate representative can be any one of the following:

  • Customer level or scheme specific agent
  • A wages clerk, representative from a payroll bureau or even the contractor’s spouse

HMRC is committed to preserving customer confidentiality, and in all other CIS related matters will only conduct business directly with the contractors or their authorised agent. However to complete subcontractor verifications we are able to deal with a request from any of the above representatives who might contact us on behalf of the contractor. This is because the information they are requesting does not stray into the realms of disclosure of personal designatory information but rather is information provided by HMRC for the proper operation of CIS, that is, there is only a minimal risk of unauthorised disclosure. However, you should always be reasonably assured that the contact is who they claim to be by carrying out the authentication process before proceeding with ‘verification’. In the case of the verification request being made by say a wages clerk or spouse of the contractor, when authenticating the contact, you should treat them as being the ‘customer’ when completing the ‘Identify Customer’ window. Refer to CISR21000 onwards for background to the authentication process.


Before making a payment and in addition to verifying the subcontractor with HMRC the contractor will also be required to confirm that one of the following exists

  • a tender is in place
  • a contract has been signed
  • a work order is in place

between the contractor and each subcontractor being verified at the time of the contact with HMRC. This ‘Declaration of Subcontractor Engagement’ must be made for all subcontractors that the contractor is seeking to verify at any one time before ‘Verification’ can proceed.

These conditions are intended to discourage contractors from attempting to obtain subcontractor information prior to the existence of an agreement to award a contract for work.

Verification - general

The first part of the verification process is to authenticate the contact or caller and confirm that they are the contractor or their appropriate representative (see the explanation above). An employee, or spouse of the contractor may ring to verify subcontractors in their capacity as payroll clerk and provided they have all the information relating to the contractor to pass ‘Authentication’ you should not refuse to verify a subcontractor to someone acting in this capacity. Refer to CISR21000 for details of how to authenticate a contractor or their authorised agent. Only after you have successfully authenticated the caller and, where more than one contractor scheme is held, established the relevant scheme identifier, can you move on to the verification process.

Contractor schemes

Verifications can only be recorded against an ‘active’ contractor scheme record. Where the contractor scheme is shown as ‘inactive’ the scheme record must be amended before you can proceed with verification.

Where the scheme is shown as

  • Superseded
  • Merged into another scheme
  • Transferred out

The contractor should be told the current recorded status of the ‘old’ scheme, be given the reference of the ‘new’ scheme and given the opportunity to verify the subcontractors against that scheme reference instead.

Information to be supplied for verification

Having authenticated the identity of the caller they must be asked to confirm that a contract exists, or a tender has been accepted, with the subcontractor(s) that the caller wishes to verify during that contact. The verification process can only proceed once the existence of a contract/tender is confirmed.

During verification the contractor or their appropriate representative will be required to provide information obtained from the subcontractor, including all of the following:

  • Unique Taxpayer reference (UTR)
  • National Insurance Number (NINO) or Company Registration Number (CRN)
  • Name or trading name of registered subcontractor

Note: The subcontractor information will differ slightly depending upon the subcontractor type. (Individual, Partnership, Company or Trust). Refer to the list of action guides in CISR51600 for specific cases. Also where a subcontractor has not yet been allocated with a NINO verification may proceed in this instance without this information.

Written requests

Where you receive verification requests in writing it is essential that they include confirmation that a tender has been accepted or that a contract or work order is in place. If this is not present the verification process must be halted and the contractor contacted, preferably by phone, in order to confirm this has been done.

Verification check

Using the details supplied by the contractor, a check is made of the CIS system in order to confirm whether or not the subcontractor is known to HMRC and has registered for CIS as a subcontractor. It will not be possible to create two matched verifications for the same subcontractor during the same contact and under the same verification reference (VR) number. If an attempt to do this is made an error message will be displayed ‘This subcontractor has already been verified’.

Successful verification

Where the check is successful the contractor will be given a system generated verification reference (VR) number (example V1234567890) that is unique to that contact. That one reference will be related to all the subcontractors verified on that occasion in relation to a particular contractor scheme. For those successful verifications you will be expected to confirm the subcontractors payment status (either ‘Gross’ without deduction or Net of Deduction (at the standard rate) from the CIS record. That payment status will apply to all payments and any change will be notified to the contractor using form CIS316.

Multiple schemes

Contractors will sometimes divide their business up into several ‘divisions’ and each division will be allocated a separate contractor scheme and Accounts Office and PAYE references. A contractor wishing to divide their business up in this way will need to make an election to their normal PAYE office, and this election, to have separate contractor schemes, will then commence from the following 6th April.

For the purposes of verifications, any division of the same contractor may use the verification details for a subcontractor obtained by another division, but the payments being made by each division will need to be kept entirely separate and recorded on the Monthly Return for each division that has paid the subcontractor.

Where verification is sought, the system-generated verification reference number will be contractor scheme related. That is to say, having completed verifications for a particular contractor scheme, if the contractor wishes to make payments to the subcontractor under different divisions you must select a further scheme, obtain details to complete verification of subcontractors working within that contractor scheme, and obtain the covering VR number.

Deceased subcontractors

Before 27th October 2008, where a contractor attempted to verify a deceased subcontractor, the system will have displayed a message to say that

  • the subcontractor was deceased,
  • the verification should be ‘Unmatched’, and
  • a deduction at the unmatched rate should be made from any payment the contractor proposed to make to the estate of the deceased subcontractor.

From 27th October 2008, the system will now display for you the payment details for the deceased subcontractor along with the date of death. A message will also be displayed to you that says ‘The reference entered relates to a deceased subcontractor. Check guidance before proceeding’.

Where the contractor needs to make a payment to the estate of a deceased subcontractor whom they have not yet verified, you should allow the latest tax treatment to be applied and create a matched verification. You would, however, expect any verification request to make a payment to a deceased subcontractor to be within a reasonable time after the date of death. Therefore, any verification request made more than six months after the date of death may be bogus or suspicious (depending on the circumstances). In these circumstances, setting an unmatched verification and asking the contractor to apply the unmatched rate of deduction may be appropriate. You should then follow the procedures for ‘suspicious’ calls.

Record of contact by contractors

Access to CIS records will be controlled by Roles and Access and recorded using the Contact History framework.

Following successful verification, contractors will be given a Verification Reference (VR)* number to show that they have contacted us and obtained details of their subcontractors’ payment status. That VR will be unique to that contact and may therefore relate to more than one subcontractor. The VR number should be recorded by the contractor against their record of that contact.

*Sample VR number for verified (registered) subcontractors: V0000543267

Where we are unable to verify the existence of a CIS record for the subcontractor and the contractor wishes to proceed and make deductions at the higher rate, the contractor will be given a unique VR* number that relates specifically to that ‘unmatched’ subcontractor. That unmatched VR number must be shown on both the contractor’s monthly return (CIS300) and on the payment statement given to the subcontractor.

*Sample VR number for verified (unmatched) subcontractors: V0000543267/B

Special cases

Where a payment is being made by a contractor in respect of a contract negotiated by a subcontractor who has since died, the payment may be made on the same basis as the subcontractor’s payment status at the date of death (either net or gross). If a contractor makes a contact in this situation, formal verification of the personal representative or Executor will not be required and the contractor should be informally advised what payment status to apply.

However, if a personal representative or Executor enters into a contract themselves, then formal verification will be required, and the person you will be attempting to verify is the personal representative or Executor and not the deceased subcontractor.

If you are verifying a number of subcontractors with a contact, and you experience a power failure, or your computer terminal ‘crashes’, then the verifications you have so far completed will be lost, along with the verification number(s) allocated to those subcontractors. You will need to let the contact know why you cannot continue any further, and offer to call them back when your service has been restored. Alternatively you could suggest that the contact Faxes you the details of the subcontractors they wish to verify, and you can then carry out the verifications from the Fax.