CIS Registration and Verification: How It Works and What to Do

‍‌​​​​​​‌‌‌‌​​‌‌​‌‌​​‌‌​​‌‌‌​​​​‍SiteKiln gives you plain-English information, not legal advice. If you need advice specific to your situation, talk to a qualified accountant or tax adviser.

The short version

CIS registration and verification is how HMRC makes sure contractors are taking the right tax off subcontractors' pay on building work. If you're a contractor, you must register and verify your subs before you pay them; if you're a sub, you need to be registered so you don't get hammered at 30%.

Why it matters

If a contractor pays subs without registering for CIS or verifying them properly, HMRC can hit the contractor with penalties and demand the "missing" tax from them. If a subcontractor doesn't register, they'll usually get 30% stopped instead of 20% (or 0% if they've got gross status), which wrecks cashflow and often leads to panic borrowing.

CIS isn't a separate tax; it's a set of rules on how tax is taken off payments from contractors to subcontractors in construction. The law sits in the Finance Act 2004 and regulations made under it, and the way HMRC actually run it is set out in CIS340 and their internal manuals. In practice, it boils down to: contractors register and report; subcontractors register so they're on the system at the right rate.

5.2.1 When you count as a contractor

You're a CIS contractor if you:

• Pay other people or businesses to do construction work for you (labour only or labour plus materials).
• Are a "deemed contractor" -- for example, a business whose yearly spend on construction operations goes over HMRC's threshold, even if building isn't your main trade.

On SiteKiln, we're mostly talking about:

• Small builders who take jobs from clients and bring in subs.
• Main contractors who put gangs together for bigger sites.

If you only ever work as a one-man band for other firms, you're usually just a subcontractor, not a contractor.

5.2.2 Registering as a contractor (overview)

To run CIS correctly as a contractor you must:

• Have a UTR (from Self Assessment or Corporation Tax).
• Set up a Government Gateway account and register as an employer to get a PAYE reference, even if your only "payments" are to subcontractors.
• Use that account to register for CIS as a contractor with HMRC.

Once you're on CIS as a contractor, you must:

• Verify any new subcontractors before you pay them.
• Deduct CIS at the rate HMRC tell you.
• File monthly CIS returns and pay CIS over to HMRC.

If you skip registration and just pay envelopes, you're taking on the tax risk personally.

5.2.3 Registering as a subcontractor (quick recap)

From the sub's side:

• You register as self-employed first and get a UTR.
• You add CIS subcontractor status (often at the same time as Self Assessment registration).
• Once registered, HMRC show you to contractors as 20% or 0% (gross), instead of forcing 30%.

This is what we covered in 5.1; the key link to this section is: if you're not registered as a CIS sub, verification will come back at the painful higher rate.

5.2.4 How contractor verification works in real life

Before a contractor pays a new sub for the first time, they must verify them with HMRC. HMRC then confirm:

• Whether the sub is registered for CIS, and
• What deduction rate the contractor must use (0%, 20% or 30%).

As a contractor you:

• Log into your HMRC CIS online service (via Government Gateway).
• Choose "Verify a subcontractor".
• Enter your details: UTR, accounts office reference, employer PAYE reference.
• Enter the sub's details (depends on whether they're a sole trader, partnership, or limited company).
• Submit and get a verification number (usually starting with "V" plus 10 digits) and the deduction rate.

You must keep that verification number and rate with your CIS records in case HMRC ever challenge what you've done.

You also have to re-verify a subcontractor if:

• You haven't included them on a CIS return in the current or last two tax years.
• They change set-up (for example, go from sole trader to limited company) or change key details like trading name or UTR.

5.2.5 What the subcontractor has to give you

For verification to work, the sub has to hand over proper details.

For a sole trader:

• Full name and any trading name.
• UTR.
• National Insurance number (no "TN" temporary numbers).

For a limited company:

• Company name.
• Company UTR.
• Company registration number.

For a partnership:

• Partnership name and UTR.
• Nominated partner's details.

If any of this is wrong or missing, HMRC often default you to 30% when you try to verify.

5.2.6 What rates come back and why

HMRC can tell the contractor to use:

• 0% (gross payment status) -- sub is fully registered and HMRC are happy with their compliance.
• 20% (standard) -- sub is registered for CIS but not on gross payment.
• 30% (higher) -- sub is not registered, the details don't match, or HMRC have pulled gross payment status.

This isn't the contractor being awkward; the rate is driven by what HMRC's system says when they verify.

5.2.7 Legal backbone (light touch)

You don't need to quote law on site, but it helps to know the scheme is not optional:

• The core CIS rules sit in Finance Act 2004 (not the Income Tax Act 2007), with detailed rules in the Construction Industry Scheme Regulations 2005.
• HMRC explain how they apply this in their manuals, including CISR51010 on verification and CISR11070 on the scheme overview.
• CIS340 is HMRC's public guide for contractors and subcontractors, which they expect you to follow.

If you follow HMRC's CIS online service and keep your records, you're doing what the legislation expects in practice.

Checklist -- what to do on your first CIS job

From the contractor side:

• Get yourself registered as a CIS contractor (UTR, PAYE ref, CIS service added).
• Collect proper details from every sub before work really gets going (name, UTR, NI or company info).
• Verify each new sub with HMRC before their first payment.
• File and store the verification number and rate with their file.
• Deduct CIS at the rate HMRC told you and show it clearly on the payment statement.

From the subcontractor side:

• Make sure you're registered for Self Assessment and CIS as a subcontractor (see 5.1).
• Give your contractor your UTR and NI number (or company details) early, not on the last day.
• Check your CIS payment statements to see what's been deducted and keep them -- they feed into your tax return.
• If you see 30% coming off and you think you're registered, chase it up quickly with the contractor and HMRC.

What to do next

• If you pay subcontractors, register as a CIS contractor with HMRC before your first payment run.
• If you are a sub, make sure your CIS registration is active and your UTR matches HMRC's records.
• Verify every new subcontractor through the HMRC CIS online service before their first payment.
• Keep verification numbers, CIS statements and monthly return copies on file.
• If you are seeing 30% deducted and think you should be on 20%, contact HMRC CIS immediately.

Sources and legislation

• Finance Act 2004 -- Construction Industry Scheme rules, contractor and subcontractor duties. legislation.gov.uk/ukpga/2004/12
• Income Tax (Earnings and Pensions) Act 2003 -- employment status and related rules. legislation.gov.uk/ukpga/2003/1
• The Income Tax (Construction Industry Scheme) Regulations 2005 -- detailed CIS verification, deduction and reporting rules. legislation.gov.uk/uksi/2005/2045
• HMRC CIS340 -- public guide for contractors and subcontractors. gov.uk/government/publications/construction-industry-scheme-cis-340

Related guides on this site

• 5.1 Registering as self-employed for construction
• 5.12 What happens if you get your CIS status wrong
• 5.3 Filing Self Assessment -- construction-specific deductions
• 5.15 Record keeping
• 1.6 CIS deductions done wrong
• 8.4 Registering for CIS as a contractor

Common questions

What rate should CIS deductions be?

20% if you're registered with HMRC, 30% if you're not, and 0% if you have Gross Payment Status. The contractor verifies your status with HMRC before paying you. If they're deducting 30%, register for CIS today. It's free and the rate drops at the next pay run.

CIS Rates reference card.

What if my contractor hasn't registered me for CIS?

If they haven't verified you, they must legally deduct 30% by default until they do. Contractors are required to register and verify every subcontractor before paying them. Report a non-registered contractor to HMRC. You can still reclaim the deduction if they give you a CIS statement.

How to Register for CIS guide.

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