Glossary · UK
What is CIS Scheme Verification?
The online process a contractor must complete before making the first payment to a new subcontractor under the Construction Industry Scheme, determining the correct deduction rate.
Full Definition
The Construction Industry Scheme (CIS) requires contractors to deduct money from payments made to subcontractors and pass those deductions to HMRC on account of the subcontractor's tax and National Insurance liabilities. Before making the first payment to any new subcontractor, the contractor must verify that subcontractor with HMRC to determine the correct deduction rate. Verification is done via HMRC's online CIS service, the HMRC app, or by telephone. HMRC will then confirm one of three outcomes: the subcontractor is registered under CIS and should be paid gross (0% deduction) -- this applies to subcontractors who have met HMRC's gross payment status (GPS) criteria regarding turnover, compliance and business conduct; the subcontractor is registered under CIS but should have 20% deducted from the labour element of the payment; or the subcontractor cannot be verified (is not registered, or the details provided do not match HMRC records) -- in which case 30% must be deducted. The contractor does not need to verify a subcontractor again for future payments unless there is a gap of two or more years since the last payment. Contractors submit a monthly CIS return detailing all payments made and deductions taken, and pay the deductions to HMRC by the 19th of each month (or 22nd electronically). Subcontractors can reclaim CIS deductions against their final Income Tax or Corporation Tax bill -- deductions are a payment on account, not a final tax charge.