CIS Verification for Subcontractors: What UK Contractors Need to Check Before April 2026

You're paying subcontractors, deducting CIS at the rate HMRC told you last year. Then April arrives, the new tax year starts, and you discover one of your subcontractors lost their gross payment status three months ago. You've been under-deducting, and HMRC wants the difference — plus penalties.

The Construction Industry Scheme (CIS) is one of the most straightforward compliance obligations UK contractors have. But it catches people out because verification status isn't static — it can change between tax years and even within them. With the new tax year starting on 6 April 2026, now is the time to re-verify your subcontractors and check your processes.

This guide covers how CIS verification works, what to check before April 2026, and common mistakes that create HMRC liability.

What CIS is and who it applies to

CIS is a tax deduction scheme administered by HMRC. When a contractor pays a subcontractor for construction work, the contractor must deduct tax from the payment and pay it to HMRC on the subcontractor's behalf. The subcontractor can then claim credit for the deduction on their tax return.

You must register as a CIS contractor if:

• You pay subcontractors for construction work (not just materials or plant hire)
• Your annual spending on construction operations exceeds £3 million, or
• You're a deemed contractor (e.g., government bodies, housing associations) spending over £1 million on construction

Construction operations covered by CIS include: building, alteration, dismantling, construction, repair, decoration, demolition, and installation of heating, lighting, power supply, drainage, and communication systems. Land preparation and site clearance are also included.

Not covered: professional services (architecture, surveying), material delivery without installation, manufacturing off-site, and carpet fitting.

How CIS verification works

Before making your first payment to any subcontractor, you must verify them with HMRC. You can verify online through the HMRC CIS online service or by phone.

HMRC will confirm one of three deduction rates:

• 0% (gross payment status) — the subcontractor receives the full payment with no deductions. Gross status is granted to subcontractors with a clean compliance record, proven turnover threshold, and timely tax returns.
• 20% (net payment status) — the standard rate. You deduct 20% from the labour element of each payment and pay it to HMRC.
• 30% (unverified) — if the subcontractor isn't registered for CIS, or HMRC can't verify them, you must deduct 30%. This is the highest rate and often catches subcontractors by surprise.

Deductions apply to labour costs only. If a subcontractor's invoice separates labour and materials, you only deduct from the labour portion. If the invoice doesn't separate them, you must deduct from the total.

What to check before April 2026

The UK tax year runs from 6 April to 5 April. The start of the new tax year is when CIS verification status is most likely to change. Here's what to do before April 2026:

1. Re-verify all active subcontractors

Verification status can change for several reasons:

• HMRC revokes gross payment status if the subcontractor fails the compliance test (late tax returns, outstanding tax debts)
• A subcontractor who was unverified may have registered for CIS and now qualifies for net or gross status
• Company restructuring or changes in legal entity may affect verification

Re-verify every active subcontractor with HMRC before your first payment in the new tax year. Don't assume last year's rate still applies. A 5-minute check per subcontractor can save thousands in penalties and under-deduction liability.

2. Reconcile your CIS deductions

Before the tax year ends on 5 April 2026, reconcile your CIS deduction records against your payment records. Check that:

• Every subcontractor payment has the correct deduction applied
• Monthly CIS returns match your actual payments and deductions
• You have verification records for every subcontractor you've paid

3. Check your monthly return filing

CIS returns are due by the 19th of each month. Late filing penalties are automatic:

• 1 day late: £100
• 2 months late: £200
• 6 months late: £300 or 5% of the CIS deductions (whichever is higher)
• 12 months late: £300 or 5% of the CIS deductions (whichever is higher) — plus potential additional penalties

If you have outstanding returns for the current tax year, file them before the year-end to avoid compounding penalties into the new year.

4. Update your subcontractor records

For each active subcontractor, ensure you have:

• Their Unique Taxpayer Reference (UTR) or company registration number
• National Insurance number (for sole traders)
• Current verification status and the date it was confirmed
• A record of all payments and deductions made in the current tax year

Common CIS mistakes

Applying the wrong deduction rate. This is the most common issue. If you deduct 20% when HMRC's current rate is 30%, you're liable for the shortfall. Always verify before the first payment and re-verify when status may have changed.

Not separating labour and materials. If a subcontractor's invoice doesn't break out materials separately, you must deduct CIS from the total payment amount. Subcontractors who want to avoid this should itemise their invoices.

Forgetting to verify new subcontractors. Every new subcontractor must be verified before you make the first payment. Not after the first invoice. Not at the end of the month. Before the payment.

Treating CIS registration as a one-off. Verification isn't permanent. A subcontractor's status can change at any time, and HMRC expects you to re-verify periodically — particularly at the start of each tax year.

Missing the employment status question. CIS applies to self-employed subcontractors. If a worker is actually an employee (based on HMRC's employment status tests), CIS doesn't apply — PAYE does. Getting this wrong creates a different, larger liability. Use the HMRC CEST tool if you're unsure.

CIS and your wider compliance obligations

CIS verification is one part of the subcontractor compliance picture. Under CDM 2015, principal contractors must also verify insurance, CSCS cards, competence, and health and safety capability. For the full pre-appointment process, see our subcontractor management guide. For a structured approach to pre-qualification, try our free PQQ template.

The practical challenge is tracking all of these obligations across 20 or 30 active subcontractors. CIS verification dates, insurance expiry dates, CSCS card renewals — each with different timescales and renewal processes. Our free insurance expiry calculator can help with the insurance side, and our CDM compliance guide covers the broader regulatory framework.

Sources

• GOV.UK — Construction Industry Scheme
• GOV.UK — Use the Construction Industry Scheme online
• GOV.UK — Check Employment Status for Tax (CEST)
• The Construction (Design and Management) Regulations 2015 (SI 2015/51)

This guide is for informational purposes and does not constitute tax or legal advice. For CIS-specific questions, consult your accountant or HMRC directly.

Last reviewed: 11 March 2026