Agreed - but need to clarify the question.
The Contractor has to verify every subcontractor. If the subcontractor has not registered for CIS then it will come back with a 30% rate. This is used until the subcontractor is properly registered and HMRC advise to pay at 20% or Gross. Or if the subcontractor tells you they have now registered you can verify again and use whatever rate comes back then.
Or, if you mean that the subcontractor is working before the contractor has registered for CIS then the contractor needs to register asap to avoid penalties. An unregistered contractor cannot verify subcontractors or deduct tax - so needs to register before the first payments to the subcontractor are due.
We've had
a few problems with contractors who only do domestics. They don't think they have to register because they are being paid "gross" so therefore they follow on that their subbie doesn't need to register and they pay them "gross". The only way to avoid all the penalties in that situation is to get the client to pay both the contractor and the subbie direct so in effect they are both contractors.
We have had major problems in the past where clients who are not mormally involved in the building industry (landscape gardeners) suddenly find themselves having to register as a contractor and a subbie and some of their subbies having to also register.
Thresholds only apply to 'Deemed Contractors'
The thresholds only apply to those outside the construction industry (such as supermarkets) who pay for construction work. If your business is within the scope of the construction industry then there is no threshold at all - however small the amounts involved, CIS applies.
The answer is simple
The contractor has to get every subbie that works for them "verified". So if the subbie isn't registered it is highly likely that 30% will be deducted. What can happen is that the contractor won't pay the subbie until they have registered thereby allowing 20% deduction (30% in some cases).