As a contractor, one of your responsibilities under CIS is to verify your subcontractors. Once you have verified a contractor HMRC will tell you the correct amount of tax to deduct.
When you take on a new subcontractor which you have not used before, you will have to verify them before payment is made.
To complete the CIS subcontractor verification process you will request the following information from your subcontractor to give to HMRC:
• UTR (Unique Tax Reference)
• Companies House Number (if limited company)
• National Insurance Number (if a sole trader or partnership but not essential for verification)
To verify a subcontractor you can use the HMRC website or commercial software.
Once you have logged in to the HMRC website, on the left-hand side there should be a link called ‘add subcontractor’, you will be asked what type of business the subcontractor is (individual, partnership, company) then a new webpage will appear requesting the subcontractor information.
Once completed you will receive the verification results and HMRC will provide you with the tax to be deducted from the subcontractor and a verification number.
The tax you will need to deduct will either be:
• 30% deduction if they are not registered under CIS
• 20% deduction if they are registered (standard/net rate)
• 0% if they have applied for gross payment status.
The verification will usually be a V followed by 10 numbers. This is proof that you have deducted the correct amount of tax.
A subcontractor will not need to be verified again if the contractor has used the subcontractor within the last two years. HMRC will alert you when the verification is out of date and only then will you need to re-verify a subcontractor.
If a subcontractor changes its status (say 20% to 0%), HMRC will notify the contractor (only if they have an up to date verification) and subcontractor of the change.
If you need any support in verifying your subcontractors, send us a message today and we would be more than happy to run through it with you. For more information take a look at our CIS Resource Hub.
This article was written for Construction Insider by Saint Financial Group, a multidisciplinary group based in the UK that helps construction businesses develop and grow. SaintFG offers a range of quality solutions in supporting businesses.
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