Understanding Subcontractor Status

Before you pay subcontractors, you must verify their statuses with the HMRC. When you verify the status of the subcontractor, you verify that the subcontractor is registered in the CIS scheme and determine the deduction rate to apply to the subcontractor. After you verify the status and deduction rate of the subcontractor, you can continue to make payments to the subcontractor without additional verification if your most recent payment was made within the current tax year or most recent two previous tax years. If you do not make a payment to the subcontractor within this time period, you must reverify the subcontractor status and deduction rate with the HMRC before processing payments.

You record the verification number given to you by the HMRC and the date of the verification in the system by using the Subcontractor Verification Status program (P74U4020). The system saves the information that you enter into the Subcontractor Verification Status program to the Subcontractor Verification Status table (F74U4020).