Answers · UK 2025/26
What is the CIS verification process for new subcontractors?
Under the Construction Industry Scheme (CIS), contractors must verify new subcontractors with HMRC before making the first payment. HMRC confirms the subcontractor's registration status and tells the contractor which deduction rate to apply: 20% (verified), 30% (unverified/not registered), or 0% (gross payment status).
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**What is CIS verification?** Before a contractor pays a subcontractor for the first time (or for the first time in the current tax year after a break), they must verify the subcontractor's status with HMRC. This is a legal requirement under the Construction Industry Scheme. **How to verify** Contractors can verify subcontractors: - Online via the HMRC CIS portal (fastest) - By calling the CIS helpline (0300 200 3210) - Via compatible payroll/accounting software The contractor needs: subcontractor's name, Unique Taxpayer Reference (UTR), and National Insurance number (for sole traders) or company registration number and UTR (for limited companies). **The three outcomes** | HMRC response | Deduction rate | Meaning | |---|---|---| | Verified (registered) | 20% | Subcontractor is registered for CIS | | Unverified (not found) | 30% | Subcontractor not found in HMRC system | | Gross payment status | 0% | Subcontractor has gross payment status | **Example: James, a building contractor** James hires a new plumbing subcontractor. He verifies through the HMRC portal. HMRC confirms the subcontractor is registered — deduction rate is 20%. James pays £10,000 for work done, deducts £2,000 (20% of £10,000 net of materials), and pays the subcontractor £8,000. James pays the £2,000 to HMRC monthly. **Materials** CIS deductions only apply to the labour element. The cost of materials purchased by the subcontractor is excluded from the deduction calculation. **Monthly returns** Contractors must file a monthly CIS return with HMRC, even if nil. Late returns attract a £100 penalty for the first month, rising to £200 (two months), £300 (three months), and then £3,000/day for more than 12 months. **Gross payment status** Subcontractors can apply for gross payment status if they meet HMRC's turnover and compliance tests. This allows them to receive payment in full without deduction. Status is reviewed annually.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.