A wee bit of tax advice please.

Builderdave

I've recently (few months ago) become self employed (joiner). I've been working as a sub contractor for a construction firm, I invoice them every month and 2 weeks later they pay me the full amount. I have a labourer who works with me and I pay him his full money and he deals with his own tax returns. The company have now told me that unless I prove to them I'm registered for 'gross tax' then they will deduct the tax at source. Now obviously I have costs etc that would be deducted from my end of year tax so if they tax me full amount then I'm out of pocket just now. I haven't contacted an accountant yet as I was going to in December but this has just been sprung on me today, can they deduct the tax from my invoice? They say they've been advised its just incase their sub contractors don't pay there tax then they as a company may be punished, this is not as I understand it, if I don't pay my tax then I'm punished not who paid me the money.
If anyone has advice it would be appreciated.

00ec25

you urgently need to get to grips with the CIS - Construction Industry Scheme
http://www.hmrc.gov.uk/cis/

This is the framework under which HRMC do indeed absolutely require a contractor to deduct tax from any subby they employ who cannot provide evidence to the contractor that the subby is registered under the CIS and can thus be paid gross.

If the contractor does not get this evidence then HMRC may indeed penalise the contractor as well as the subby

It is also not clear from your post whether your own labourer is in fact your employee or whether he is genuinely self employed. If the latter then you have just become a contractor in your own right and must therefore deduct tax from your labourer unless he too registers under the CIS

When you speak to an accountant make sure you get one who is familar with CIS and building trades, not all of them will be and it does matter as its a bit of a specialist area

AIFOP

Builderdave,

As 00ec25 states you need to urgently get to grips with the CIS.

Also, to clarify, even if you or your subcontractor is registered with CIS, deductions may still be required by HMRC if payment status is 'net'.

http://www.hmrc.gov.uk/cis/subcontractors/advice-pay.htm

Gross payment status requires succesfully passing three tests.

bartnwood

00ec25 wrote: »

When you speak to an accountant make sure you get one who is familar with CIS and building trades, not all of them will be and it does matter as its a bit of a specialist area

Hello Builderdave,

You need to register with HMRC immediately.