Verifying Subcontractors Under CIS: What Contractors Must Know

Why Verification is Critical

Under the Construction Industry Scheme (CIS), contractors cannot simply pay subcontractors without checks. HMRC requires every subcontractor to be verified before the first payment is made.

Failing to verify correctly means contractors must deduct tax at 30% instead of 20% — a costly mistake for subcontractors, and a compliance risk for contractors.

This article explains the subcontractor verification rules for 2025/26, highlights the risks of getting it wrong, and shows how Wexley & Associates ensures our clients never fall foul of HMRC.

What Subcontractor Verification Means

Verification is HMRC’s process for confirming:

• Whether a subcontractor is registered under CIS.

• What deduction rate should apply (20%, 30%, or 0% for Gross Payment Status).

Contractors must verify subcontractors before making their first payment.

👉 If the subcontractor is not verified, HMRC rules force the contractor to deduct at 30% — instantly cutting into the subcontractor’s income.

Deduction Rates After Verification

Once verified, subcontractors are assigned one of three deduction statuses:

• 20% — standard deduction rate for verified subcontractors.

• 30% — applied if the subcontractor cannot be verified or has compliance issues.

• 0% (Gross Payment Status) — reserved for subcontractors who meet HMRC’s strict compliance and turnover tests.

🔗 HMRC: CIS Deduction Rates

Common Verification Pitfalls

Contractors often trip up at the verification stage:

• Skipping verification → automatic 30% deduction applied.

• Incorrect details → name, UTR, or NI number errors block verification.

• Re-verifying unnecessarily → wasting time and creating duplicate records.

• Not handling groups properly → where subcontractors operate under multiple entities.

Each mistake risks HMRC penalties, delays, and cash flow headaches for both contractor and subcontractor.

Penalties for Getting It Wrong

HMRC can issue penalties for:

• Paying subcontractors without verifying first.

• Applying the wrong deduction rate.

• Filing incorrect CIS returns due to bad verification data.

👉 Contractors are responsible for errors, even if subcontractors provided wrong information.

🔗 HMRC: CIS Guide (CIS 340)

How Wexley Ensures Accurate Verification

At Wexley & Associates, we:

• Verify subcontractors correctly before the first payment.

• Ensure all details match HMRC records to avoid errors.

• Manage Gross Payment Status (GPS) applications for subcontractors.

• Keep records compliant so clients are protected in the event of an HMRC review.

This prevents costly 30% deductions, reduces risk of HMRC penalties, and ensures payments run smoothly.

Don’t Risk 30% Deductions

Verification is one of the most important — and most commonly mishandled — parts of CIS. One mistake can cost subcontractors thousands and expose contractors to HMRC penalties.

👉 Contact Wexley & Associates today to take CIS verification off your hands and keep your business fully compliant.

References

• HMRC: CIS 340 – Construction Industry Scheme: Guide for Contractors and Subcontractors

• HMRC: CIS Deduction Rates

• Related Wex Insider article: Contractor Registration & Deemed Contractor Rules Explained