Every subcontractor paid under the Construction Industry Scheme has their payment taxed at one of three rates, and which one applies depends entirely on their registration and verification status with HMRC, not on the trade, the job or the contractor. Getting the rate wrong, in either direction, is the single most common CIS mistake, and it usually comes from treating a subcontractor's status as fixed rather than checking it for each new engagement.
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A subcontractor approved by HMRC for gross payment is paid in full, with no deduction at all. They still need a statement showing the payment and the 0% deduction; gross status doesn't remove the paperwork requirement, only the tax taken at source.
The standard rate for a subcontractor who's registered with HMRC under CIS but not approved for gross payment. This covers the majority of subcontractors most contractors deal with day to day.
Applied when a subcontractor either isn't registered under CIS at all, or hasn't been verified with HMRC for this contractor before their first payment. Verification is done per contractor-subcontractor relationship, so a subcontractor verified elsewhere still needs verifying with you.
Whichever rate applies, it's deducted from the gross payment minus materials and other genuinely excludable costs, never from the full invoice total. Getting the base wrong produces the wrong deduction even with the right rate.
By verifying them with HMRC before their first payment, using their UTR and, for existing subcontractors, their existing verification reference. HMRC will tell you whether to deduct at 0%, 20% or 30%.
Yes. A subcontractor can gain or lose gross payment status, or become verified partway through a working relationship. Use the rate that applied at the time of each payment, not the rate that applies now.
Under-deducting leaves you liable to HMRC for the shortfall; over-deducting shortchanges the subcontractor, who then has to reclaim it through their own tax return. Neither is a paperwork-only problem, which is why the status needs checking per subcontractor, not assumed.
No. You tell us the status for each subcontractor, 0%, 20% or 30%, and we apply the correct deduction and produce the statement. Verifying the status itself is done directly with HMRC, separately from this.
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