When you take on a new sub-contractor even if you are only paying them for one day they will need to be verified with HMRC. You will need to obtain a few details from the Sub-contractor to establish whether you need to make a 20% deduction or a 30% deduction from their gross pay. This must be done before any payment is made to the subbie.
20% - if the subcontractor has a Unique Taxpayers Reference (UTR) and they are registered as a sub-contractor with HMRC.
30% - if you verify a subcontractor and the status comes back as 30% this is generally because they are yet to obtain a UTR number, they are not registered with HMRC under the Construction Industry Scheme or they have not provided enough or inaccurate information.
Once you have established what percentage needs to be deducted, as a contractor, you pay the subcontractor the net amount and pay over the deductions to HMRC when you submit your CIS Return.
Use this form to capture the information required to submit the verification.
Construction Industry Scheme (CIS) - Verification Data
To obtain your UTR number you must register with HMRC this can be done by completing a CWF1 form and sending it to HMRC, telephoning HMRC on 0845 915 4515 or registering online at https://www.gov.uk/set-up-sole-trader
If you are a Limited Company the UTR number will be sent to the registered office shortly after incorporation and will appear on all correspondence from HMRC addressed to the Company.
Register as a sub-contractor - Once you have your UTR number, you will need to telephone HMRC on 0300 200 3210. You only need to register once and each time a contractor searches the records to verify you you should appear on the record and have 20% deducted from your gross pay.
Obtaining a UTR Number (Unique Taxpayers Reference)
Each time you make deductions from a subcontractor you must provide them with a deduction statement (like an employer would produce a payslip for an employee). In some instances these can be produced at the end of every month or on a weekly basis if they are paid weekly. These statements are collected by the subcontractor and act as proof of their income and the amount of CIS they have paid and it is these statements that are used to prepare their year-end self-assessment tax return.
Payright Payroll Ltd will produce such deduction statements for the contractors for each pay period to distribute to the Subcontractors. They will look slightly different to these as we use an in-house payroll program.
CIS - Subcontractor Deduction Statement
To enable you to pay an employee you must first register as an employer with HMRC. At Payright Payroll Ltd we can do this for you via the online services at https://online.hmrc.gov.uk/registration/newbusiness/introduction
Once registered you will receive an Accounts Office Reference and a PAYE Reference. As your agent, we will also register you for 'online tools', this enables us to view any outstanding PAYE amounts any important messages and enables us to keep up to date with the latest tax codes issued to your employees. This ensures that the information we hold is always up to date and avoids any unnecessary worry within your workforce.
Please complete the form with as much information as possible and email it to us on email@example.com
New Employer Form - Registration
New Employee Form
Once you are registered as an employer and you are ready to pay your employees we will ask you to complete a new employee form. These forms provide vital information required by us under RTI and also contain a declaration that enables us to identify what type of new starter they are for example they may not have a P45 from their previous employer but have had a job within the tax year, this will determine a tax code for them to ensure they are paying the correct tax and National Insurance.
If you decide to take on another employee simply ask them to fill in the form and send it off to us.
Appointing us as your payroll agent enables us to receive correspondence from HMRC, talk to them on your behalf, maintain and amend the records they keep and receive employee tax codes directly so that we always hold the most recent information. Our clients find this invaluable as they have the peace of mind that their employees are paying the correct tax and that they will not be receiving a demand from under paying.