Help Self asseesment tax as a contractor

kevkj

I am so confused.

I have been unemployed for 12 months and have been offerered a contractors job as part of a gang refurbishing council houses.

Now the strange bit.My gang bosss says i will be self employed but that he pays the tax for me at 30%.

I have never heard of this being the case just thought it was PAYE or i pay my own self assessment.

Also i am starting work pretty much 3/4 through the current tax year.I can earn the single mans allowance of over £7000 before tax which would pretty much make me exempt for tax this financial year 2011-2011.

If i had paid my tax for this year then i wouldnt have to put anything away but my boss is taking a full 30%.

He wont put his returns in for this year until Jan 2013 i assume so will i will not get a rebat until after this date.

Any advise please.

FatAndy

You need to spend a bit of time reading the CIS section of the HMRC website - http://www.hmrc.gov.uk/cis/subcontractors/index.htm.

Under CIS rules if you aren't a registered sub-contractor the contractor must deduct 30% tax from any payments made to you for labour and pay this over to HMRC, which effectively means you're making payments on account. At the end of the year you submit a tax return, calculate the amount of tax you owe and then you either pay the difference or (probably more likely) get a refund of any overpayment (http://www.hmrc.gov.uk/cis/subcontractors/reg-obs.htm).

If you register with HMRC then the contractor will have to deduct 20% rather than 30%.

Basically the reason for this is that the construction industry had a massive problem with people being paid cash in hand and giving false names to employers. The CIS scheme makes it more difficult for subbies to get away with dodging their tax.

PlutoinCapricorn

Kev, before I came to MSE I too thought that either you were an employee and paid tax under PAYE or you were a freelancer/sole trader and did self assessment, unless of course you had a limited company.

However, special rules apply to the construction industry, and tax does indeed get deducted at source although you are not an employee. You do need to understand CIS: there are plenty of knowledgeable people here who will help.

As a matter of interest, the IT world and some nannies are a special case too.

chrismac1

Are you a UK national? If so, once you have registered self-employed and give your employer your UTR (Unique Taxpayer Reference) your deduction will be 20%. You'll benefit from having an accountant for year 1, even if you then feel confident enough to do your own in future years. CIS people are priority cases for me in the second week of April, when the tax database has rolled over and I can get in to file their returns and claim back the tax refunds they are due. Note that for this purpose regardless of when you decide to do your accounts to, CIS deduction statements run from 6 April to 5 April on your tax return - a few local accountants miss this, so when I get clients from them I can have a "catch up" for the new client and get off to a good start with them.

I am sending you a link on the main things you need to know to minimise your tax bill within CIS.

kevkj

Thankyou for the replys .

Yes i am a UK national.

So i need to register as self employed (CIS).

Even though my boss is paying my tax for me, i still have to put yearly tax assessment in?

As regards all the overpayment im paying now in tax this year 2011-2012 i cannot claim back until i put my tax claim in for 2011-2012 in by January 2013.Is this correct or can i put a claim for a rebate in earlier say late April 2012?

BoGoF

If you register as a CIS sub contractor the tax deduction will be reduced to 20%.

Yes, you will need to complete a Self Assessment Tax Return and you can submit this as soon as practical after 5/4/12. To speed things up you may want to register for online filing as soon as you have received your Unique Taxpayer Reference (UTR) which you will get once you have registered with HMRC.

chrismac1

You can claim by the second week of April 2012 as soon as the database is rolled over, you should get the refund direct to your bank within 2 to 5 weeks of this. Make sure you claim all your allowable self-employed expenses if you do your own tax return.

BoGoF

Also remember that any taxable benefits you have received prior to your self employment should be declared in your Tax Return - the P45 would have got when you signed off will show the figure to declare.

kevkj

When you say benefits ,does this include housing and ESA benefits i was on for this year.

BoGoF

Housing - not taxable

ESA - depends if contributions based (taxable) or income related (non taxable).

Did you receive a P45 from benefits office when you signed off?

Bean_Counter

kevkj wrote: »

My gang bosss says i will be self employed but that he pays the tax for me at 30%.

Under the CIS scheme he should also give you a statement each month showing how much tax he has deducted for you.