Before a contractor pays a subcontractor under the Construction Industry Scheme, they must ask HMRC one question: at what rate should tax be deducted? Verification is how they get the answer.
Before a contractor can pay a subcontractor under the Construction Industry Scheme, they have to answer one question: how much tax should I hold back? They are not allowed to guess. They must ask HMRC directly, and that check is called CIS verification. It is the step that decides whether a subcontractor has 20%, 30% or nothing deducted from their labour, and it is a legal obligation on the contractor, not an optional formality.
The whole Construction Industry Scheme hinges on the contractor deducting the right amount. Verification is the mechanism that makes sure they do. Without it, a contractor would have no reliable way of knowing whether a subcontractor is registered, and might deduct too little (leaving HMRC short) or too much (squeezing the subcontractor's cash flow). By forcing the contractor to confirm status with HMRC first, verification ties the CIS deduction rate to the subcontractor's actual registration.
It is the contractor who carries the burden here. They must hold the subcontractor's details, run the check through HMRC's online CIS service or commercial software, and keep the result on record. A contractor who fails to verify and then deducts at the wrong rate can face penalties and be held liable for tax that should have been withheld.
When a contractor submits a subcontractor's name, Unique Taxpayer Reference (UTR) and National Insurance number or company details, HMRC responds with one of three outcomes.
| HMRC response | Deduction rate | Meaning |
|---|---|---|
| Registered for CIS | 20% | Standard rate for registered subcontractors |
| Not found / not registered | 30% | Higher rate for unverified or unregistered subcontractors |
| Gross payment status | 0% | Subcontractor pays all tax through their own return |
HMRC also returns a verification reference number. For subcontractors who must be deducted at 30% because they could not be matched, the reference carries extra characters to flag the higher rate. The contractor must apply exactly the rate HMRC gives, not a rate they assume.
Take a contractor, Westgate Builders, taking on a new plasterer, Aisha, in 2025/26. Before paying her first invoice, Westgate verifies her with HMRC using her UTR and National Insurance number.
| Step | Detail |
|---|---|
| Subcontractor | Aisha (new to Westgate) |
| Details submitted | Name, UTR, NI number |
| HMRC response | Registered for CIS |
| Verification number | V followed by digits |
| Rate to apply | 20% |
Because HMRC confirms Aisha is registered, Westgate deducts 20% from the labour element of her invoices and records the verification number on each deduction statement. Had HMRC been unable to match her, the response would have set the rate at 30% until she registered and was re-verified. Aisha can use the CIS calculator to check the deduction and estimate any refund once she files.
Verification is needed before the first payment to a subcontractor. After that, the contractor generally does not need to re-verify the same subcontractor while they keep appearing on the contractor's monthly CIS returns. The rule of thumb is the current tax year plus the previous two: if a subcontractor has been included on a return within that window, no fresh check is required. A longer gap means the subcontractor must be re-verified, because their registration, and therefore the correct rate, may have changed in the meantime.
Verification is the contractor's safeguard: it pins the deduction rate to HMRC's record, so the 20%, 30% or 0% applied is never just a guess.
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