Verifying subcontractors under CIS

What verification is for

Before a contractor pays a subcontractor under CIS, it must verify them with HMRC. The verification returns the rate at which deductions must be made.

Paying before verifying is the error that produces most CIS penalties, because the wrong rate is then applied to every payment until somebody notices.

The rates it returns

• Gross payment status, where no deduction is made.
• The standard rate, for a subcontractor registered under the scheme.
• The higher rate, where the subcontractor is not registered or cannot be matched.

A verification stays valid for the current tax year and the two that follow, provided the subcontractor is paid in that period.

What to record

Keep the verification reference, the rate returned, and the date. Give the subcontractor a payment and deduction statement within 14 days of the end of the tax month.

Monthly returns are due by the 19th, and a nil return still has to be filed.

Where it goes wrong

Almost always in the gap between onboarding and the first payment. Verification belongs with the paperwork that starts an engagement, not with the payment run that ends the month.