Your first step is to register as a contractor. You can do this through the government’s website and need to register prior to starting any construction. Once you’ve completed the process, HMRC will send you a letter with the information you need to begin work as a CIS contractor.

Once you’ve completed that process, HMRC will send you a letter with the information you need to begin work as a CIS contractor.

Engaging subbies

As a contractor you need to confirm each subbie’s employment status. This is determined by the service they will be providing, so you need to fully understand the work to be undertaken and the terms of engagement.

Verification

You need to verify every subbie with HMRC before you can make any payments.  HMRC will confirm the subbie is registered with CIS, and the rate of deduction you need to use.

Any subbie you’ve used in the current or last two tax years must also be verified if you haven’t included them in a CIS return.

How do you verify a subbie?

You can use the free online CIS service from HMRC or a commercial CIS software packages.  Make sure you have your:

• Unique Taxpayer Reference (UTR)
• HMRC accounts office reference number
• HMRC employer reference

You’ll also need your subbie’s:

• Legal business name or trading name they gave when registering with CIS
• UTR
• National Insurance number if they’re a sole trader
• Company registration number if they’re a limited company

If you have several subbies to verify, you can use the government’s Electronic Data Interchange (EDI) system.

Employment status checks

You can use HMRC’s online Employee Status Indicator to check a status for tax purposes.  However be aware this tool is only an indication and is not definite. If HMRC rule the status is wrong you cannot use this in your defence.

You can check out your potential liability for getting it wrong here.

Looks complicated?  If you leave it to Hudson Contract you can be certain every subbie is legitimately self-employed

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