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Part 2 of 7 · CIS deduction checker series ~5 min read

Verifying a subcontractor before the first payment

Verification is the part of CIS everyone thinks they have done, because they did it once. The rule is a window rather than a one-off: the answer HMRC gave you holds while the subcontractor keeps appearing on your returns, and stops holding when they drop out of them for long enough.

Key takeaways

  • Verify before the first payment, and again if they have not been on a return in the current or previous two tax years.
  • The answer is three things: a treatment, a verification number, and the date you asked.
  • Unmatched means the higher rate, and a verification number with letters added.
  • HMRC gives recent contractors 35 days’ notice of a status change. The new rate applies after the notified date.
  • Match invoices to verifications by UTR, not by the name at the top of the invoice.

One question before every payment

Deciding whether a subcontractor needs verifying before paymentA vertical chain inside an AWS account container, entered from a box on the left labelled A payment due to a subcontractor this tax month. The first step asks On a return recently, meaning this tax year or the previous two, with a side exit reading yes: Rate on file, unless HMRC has notified a change. The second step is Verify with HMRC, using the name, the UTR, and a National Insurance or company number. The third step asks Matched to a CIS registration, with a side exit reading yes: 20 per cent or gross, whichever HMRC says applies. The final step is Unmatched: 30 per cent, and a verification number with letters added. A note says to keep all three parts of the answer, because a rate with no verification number or date shows a percentage was typed, not that anyone checked.AWS ACCOUNTA payment dueto a sub, in thistax monthOn a return recently?this tax year orthe previous twoRate on fileunless HMRC hasnotified a changeyesVerify with HMRCname, UTR, and NIor company numberMatched?to a CISregistration20% or grosswhichever HMRCsays appliesyesUnmatched30%, and a numberwith letters addedKeep all three parts of the answer. A rate with no verification number or date shows a percentage was typed, not that anyone checked.
Fig 1. One question, one verification and two outcomes. The first exit is the common one, which is why the window it depends on is computed rather than remembered.
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The window is in tax years

HMRC’s rule is that you do not need to verify a subcontractor again if they were included on one of your CIS returns in the current tax year or the previous two. Outside that, you verify as though they were new. Tax years run from 6 April to 5 April, so the window is not a rolling thirty-six months; it jumps forward every April.

Which makes it a computed field. The system holds, per subcontractor, the latest tax year they appeared on a return, and derives in or out of the window from the tax year of the payment. A roofer last paid in March 2023 was on a 2022-23 return. For a payment in the 2026-27 tax year the window covers 2024-25, 2025-26 and 2026-27, so the roofer is verified again, even though the rate on file may well still be right.

Nobody remembers this unaided, because the subcontractors who drift out of the window are the occasional ones, and the occasional ones are exactly the ones whose details are most likely to have changed in the meantime.

What the answer contains

A verification tells you whether the subcontractor is registered and what treatment to apply: gross, the standard 20 per cent, or the higher 30 per cent. It comes with a verification number. Where HMRC cannot match the subcontractor to a registration it still issues a number, with one or two letters added to the end so that it is unique to that subcontractor, and the deduction is at the higher rate.

Unmatched is not always the same as unregistered, and the difference decides what happens next. An unregistered subcontractor needs to register. An unmatched one may well be registered under a slightly different name or with a mistyped UTR, and in that case a corrected verification can move them from 30 per cent to 20. The system records which it believes applies and why, because ten points on a deduction base of a few thousand pounds a month is cash the subcontractor would rather have now than at their year end.

Match on the UTR

The verification is made against a name and a set of identifiers, and next month’s invoice arrives under a trading name. So the record stores the name exactly as verified beside the UTR, and the invoice read in part 3 uses the UTR it finds to select the verification. Where an invoice prints no UTR, the match falls back to the supplier record and is flagged as a fallback rather than treated as certain.

When HMRC changes the answer

A CIS status change from HMRC's decision to the contractor's next paymentA horizontal row of five boxes joined by arrows. Status review, where HMRC decides a treatment changes. Sub notified: the subcontractor gets ninety days' notice and time to appeal. You are told: the contractor gets thirty-five days' notice if recently involved. Notified date, written into the verification record. And Next payment, at the new rate, with nothing before it affected. A note says HMRC tells contractors who used the subcontractor in the current or previous two tax years, and anyone outside that window hears nothing.A STATUS CHANGE, FROM HMRC'S DECISION TO YOUR NEXT PAYMENTStatus reviewHMRC decides atreatment changesSub notified90 days' notice,time to appealYou are told35 days' notice, ifrecently involvedNotified datewritten into theverification recordNext paymentat the new rate,nothing before itHMRC tells contractors who used the sub in the current or previous two tax years. Anyone outside that window hears nothing.
Fig 2. The same change seen from both sides. The contractor’s part starts at the third box and ends at the fifth, and the record has to hold the date between them.

A notice is a new version, not an edit

When a change notice arrives it is written as a new verification row carrying its effective date, rather than by overwriting the rate. Payments made before the notified date keep the old treatment, payments after it take the new one, and a year later both can be explained from the same table.

The expensive version is a subcontractor losing gross payment status. A contractor that keeps paying gross after the notified date has made no deduction from payments that required one, and the scheme makes the contractor responsible for paying that amount to HMRC whether or not it was deducted. The notice is a letter; the record is what stops the next payment run from ignoring it.

What the verification record holds

  • UTR. The key, because names on invoices drift and UTRs do not.
  • Name as verified. Exactly as submitted, beside the trading names seen since.
  • Treatment. gross | standard | higher, with the rate on that date.
  • Verification number. Including any letters HMRC added for an unmatched result.
  • Source. verification | carried_over | change_notice, and the date of each.
  • Effective from. The date a change notice names, where there is one.
  • Last on a return. The tax year, from which the window is derived.

The next post is the number the rate gets multiplied by, which is where the Leicester contractor’s GBP 19,189.40 came from: what counts as materials, and what counts as evidence for them.

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