Verification is not an Employment Status Check

In March 2007, contractors were sent lists (CIS333) of subcontractors, showing subcontractors that do not have to be verified following the launch of the new Construction Industry Scheme in April 2007.

 
Before a contractor makes first payment to a subcontractor, the contractor must contact HMRC to verify the subcontractor in order to confirm that the latter is known to HMRC and registered within CIS, and to obtain details of their tax treatment within CIS.
 
If the subcontractor is successfully verified the contractor will not need to verify them again for any payments in the current tax year or the two tax years subsequent to the date of verification or last payment.
 
If the contractor paid subcontractors in the two tax years prior to the start of the new scheme and HMRC was able to verify them the contractor was sent a form CIS333 advising him or her:
  • That he or she did not need to verify them; and
  • Which rate of deduction to apply to payments made to them.
 
The contractor will then be told which tax treatment to apply to payments made to each subcontractor, i.e. gross payment or payment under deduction.
 
There have been some contractors who have misunderstood the ‘verification status’ of the subcontractors and assumed that being on the list as verified means that this is evidence that HMRC is granting them guaranteed self-employed status. Contractors need to understand that verification is not the same as an employment status check. It remains the responsibility of the engager to consider for each subcontractor, for each contract, whether they should be more properly treated as employees. If this is the case, then they should be paid under PAYE and not through CIS.

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