Many businesses - including sole traders, partnerships and companies - use trading names that are different from the business' legal name. Some have several different trading names.
If you're a contractor or a subcontractor under the Construction Industry Scheme (CIS), it's important to know which name to use when you operate the scheme. No matter how many trading names you use, HM Revenue & Customs (HMRC) will only register your legal name and one trading name
This guide explains what to do if you're a CIS subcontractor using a trading name. It also explains what to do if you're a contractor and you deal with subcontractors who use a trading name.
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When you register for CIS as a subcontractor you will be asked to give HMRC your legal business/company name and your unique taxpayer reference (UTR). You will also be able to give them one trading name for their records.
It's important to give HMRC your trading name if you're going to use it when you start working for a contractor. If you don't they may not be able to find your details when a contractor contacts HMRC to check ('verify') that you are registered with them and this could affect how you are paid.
Your business may have more than one trading name but you will only be able to use one trading name (and the legal business name) in any dealings with HMRC.
If your subcontractor business (whether you're an individual or a company) wishes to register as a partner under CIS HMRC will register the partnership separately adding the partnership UTR and the name under which it trades.
If your business uses a trading name but hasn't registered it with HMRC, or uses more than one trading name and you give a name to your contractor that differs from the one that you used when you registered under CIS, HMRC may not be able to find your details when your contractor comes to verify you. This may affect how you are paid. If HMRC can't confirm that you're registered under CIS, they will inform your contractor to make a deduction from your payment at the higher rate (30 per cent).
You can ask your contractor to pay you under your registered business name or the trading name you gave to HMRC. If you have more than one trading name and you wish the payment to be made to a name not known to HMRC your contractor may be reluctant to do so since they cannot verify that this business is registered with HMRC.
If you're a subcontractor and you change your trading name, get in touch with HMRC to tell them so that they can update their records. Tell the contractors that you work for too, so that they continue to use the right details for your business when they operate the scheme.
The contractor monthly return includes certain details about each payment you make to your subcontractors, including the subcontractor's name. The names you include will have to match HMRC’s own records; otherwise they won't recognise the subcontractors.
It's best to use the name that you used when you verified the subcontractor. But it's acceptable to use their registered trading name if they have one, as long as you make sure that you get their UTR and their National Insurance or company registration number right.
If you're using a subcontractor's name that you know HMRC has no record of because they couldn't verify it, it's important to include the verification reference number HMRC gave you on the return too. If you're using a pre-populated return it'll show each subcontractor's name, their UTR and, where appropriate, their verification reference number.