Before paying a new subcontractor for construction work, a contractor must verify them with HMRC online. HMRC confirms whether the subcontractor is registered and whether to pay gross, deduct 20% or deduct 30%, and gives a verification reference. A contractor need not verify again if it included the subcontractor on one of its monthly returns in the current tax year or the previous two.

When must a contractor verify?

Regulation 6 of the Income Tax (Construction Industry Scheme) Regulations 2005 (SI 2005/2045) requires a contractor to verify any person it proposes to pay under a construction contract, and that person’s nominee if payment is made through one. HMRC’s guidance at CISR51010 puts it simply: before making a first payment to a subcontractor, the contractor must go online and verify them.

There is also a timing condition. Regulation 6(3) says a contractor may not verify unless it has a contract with the subcontractor or has formally accepted a tender. Verification is not a way to vet a list of possible workers before any work is agreed.

Verification does not settle employment status. CISR13110 says the contractor must first be satisfied that the arrangement is one of self employment, and each monthly return includes a declaration to that effect. GOV.UK warns of a penalty of up to £3,000 for giving the wrong employment status on a return. See employment status tests.

When can a previous verification be relied on?

Regulation 6(4) lists the cases where a contractor need not verify:

  • the subcontractor was included on the contractor’s monthly return in the current tax year or either of the previous two;
  • the contractor is a company and another company in the same group included the subcontractor on a return in that period;
  • the contractor has elected to run separate schemes for different groups of subcontractors and included the subcontractor on a return for another of its schemes in that period;
  • the contractor took over the contract in a transfer of a business as a going concern, the previous owner met one of the conditions above, and HMRC has been told of the transfer.

The test looks at returns, not verification dates. CISR51010 explains that as long as payments continue, a contractor may keep using the same status indefinitely unless HMRC says otherwise. Regulation 6(7) entitles the contractor to assume a status has not changed, and regulation 6(6) requires HMRC to notify the contractor if a subcontractor it has paid or verified in that period moves between gross and net or stops being registered.

Illustration only. The current tax year is 2026 to 2027, so the previous two are 2024 to 2025 and 2025 to 2026. A roofer last appeared on a builder’s return for a payment in February 2024, which falls in 2023 to 2024. If the builder hires him again now, it must verify him again before paying. Had he been paid in May 2024, no new verification would be needed.

When does a change in the contractor’s business mean verifying again?

Verifications sit with the contractor’s scheme. CISR51080 explains that when a sole trader or partnership incorporates, or a sole trader becomes a partnership, a new PAYE scheme is needed and all existing subcontractors must be verified again. A partner joining or leaving a continuing partnership does not normally require it. After a takeover, no new verification is needed if the old scheme continues, but if the new owner opens a new scheme it must verify everyone.

What information is needed?

Regulation 6(2) and GOV.UK set out the details. The contractor gives its own UTR, Accounts Office reference and employer reference. For the subcontractor it needs:

Subcontractor Details required
Sole trader Name, UTR and National Insurance number
Partnership Partnership name and UTR, and the nominated partner’s details
Company Company name, company UTR and company registration number

GOV.UK stresses that the details must exactly match those the subcontractor used when registering. Temporary National Insurance numbers, starting with TN or two digits, cannot be verified. HMRC’s guidance says verification may go ahead without a National Insurance number where the subcontractor has not yet been given one (CISR51020).

How is verification done?

Contractors verify through HMRC’s CIS online service or commercial CIS software; GOV.UK says software is needed to verify more than 50 subcontractors. Online verification has been mandatory since 6 April 2017 (CISR12150). An agent, payroll bureau or wages clerk can verify for the contractor if they can pass HMRC’s security checks (CISR51010). Verifications can only be recorded against an active contractor scheme, so a contractor that had asked for its scheme to be treated as inactive must deal with that first (CISR51110).

What does the verification reference mean?

A successful check gives a unique reference such as V1234567890. One reference covers every subcontractor verified on that occasion for that scheme (CISR51010). Keep it with the subcontractor’s records.

If HMRC cannot match the subcontractor and the contractor continues, it gets a reference with a suffix, such as V1234567890/A, unique to that subcontractor (CISR51120). The contractor must deduct at 30%, show that reference on its monthly return and on the subcontractor’s payment and deduction statement, and tell the subcontractor to contact HMRC. The reasons a match fails, and the effect on pay, are covered in CIS deduction rates explained.

What should happen after an unmatched result?

If the failure was a simple mistake in the details, the contractor can check them and verify again before making the payment, which cancels the unmatched result (CISR51060). If the subcontractor is not registered, they need to register; see registering as a CIS subcontractor. Once they do, HMRC can notify contractors of the new status on form CIS316B, and the new rate applies to later payments. The contractor must not refund deductions already made at 30% (CISR72100), because its return has to show what was actually deducted (CISR72030).

Where do contractors go wrong?

  • Paying first and verifying afterwards, then having to recover the correct deduction.
  • Verifying with a subcontractor’s trading name or a mistyped UTR, producing an avoidable 30% result.
  • Counting two years from the last verification date instead of looking at the tax years in which the subcontractor was on a return.
  • Assuming verifications carry over after incorporating or opening a new scheme.
  • Treating a successful verification as proof that the worker is self employed.

For how verification fits with deductions, returns and payments, see how the Construction Industry Scheme works, and for subcontractors paid without deduction see gross payment status.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.