Yes — verify every subcontractor before their first payment. It is quick, and the result decides whether you pay them gross or deduct, so get it right before money moves.
The process. First register as a CIS contractor if you have not already. Then use HMRC's CIS online service (via Government Gateway) to verify each subcontractor before you pay them. You will need their full name, Unique Taxpayer Reference (UTR) and National Insurance number (or company registration number for a company). Ask for these details up front when you engage them — genuine subcontractors provide them routinely.
The three possible outcomes. HMRC tells you which deduction rate to apply: 0% (gross payment status — pay in full), 20% (registered subcontractor — deduct 20% from the labour element and pay the rest), or 30% (unregistered — deduct 30%). The deduction is taken from the labour element only, not materials, so ask the subcontractor to split labour and materials on their invoice and keep evidence where they supplied materials directly.
If you cannot verify someone. Do not pay gross. If verification fails or the subcontractor will not provide their details, HMRC's position is that you must apply the 30% deduction (or not engage them at all). Paying gross without a verified gross-payment status leaves you liable for the tax that should have been deducted, plus interest and penalties.
Record-keeping and returns. File a monthly CIS return (nil returns too), pay the deductions over to HMRC, and give each subcontractor a payment and deduction statement within 14 days of the end of each tax month. Keep invoices, verification records and statements for at least three years after the end of the tax year they relate to.
One last tip: verification confirms their CIS tax status, not their employment status — separately satisfy yourself they are genuinely self-employed, or you could face an entirely different bill.
