Sole trader paying another sole trader - tax implications?

Ashmil

Hi

Hoping for some advice please. I am a freelance sole trader, doing music tech and suchlike in schools.

I have been hired to do a new project for £2k for one council recently. To deliver this the project, I am going to use a another freelancer as a co-tutor, and I am going to pay her out of the £2k I get paid.

How do I handle this correctly in terms of paying tax?

Any advice appreciated.

vax2002

You get an invoice with a national insurance number on.

Horace

The freelancer invoices you for their time and you pay it, you keep a copy of the invoice and keep a record of the payment made to the freelancer.

That way it goes through your books legitimately and goes through the freelancer's book the same way.

anamenottaken

What you pay the other freelancer is a cost to your enterprise and is deducted from your income and so is not subject to tax in your return.

Rather than an NI number for the other person, it would be safer to ask for their HMRC registration reference.

heretolearn_2

They invoice you for their fee.

This becomes just another expense for your business, treat it in the same way as your phone,stationery etc. At the end of the year profit = your turnover (income) minus your expenses. You only pay tax on your profit.

Their own tax is their own affair, but it's wise to ensure they are properly registered as self employed by requesting their UTR number.

Ashmil

OK great, many thanks for the info!

Notmyrealname

vax2002 wrote: »

You get an invoice with a national insurance number on.

Yet again, more vax2002 rubbish. There is no requirement for a national insurance number on it.

You get an invoice from them and pay it and file it the same as any other.