Invoicing non-VAT registered contractors

agoodbloke17

Hi,

Can anyone help with this?

I have taken over a limited company selling building materials.

I have invoiced a client for (approx) £5k materials and £3K for the installation - it's a VAT invoice and he's paid me 50%.

I have a question about the installation costs. The builder I want to use is not VAT registered, but I believe he has a CIS card, and has quoted £2k to do the works.

How does he invoice me so I can pay him? Do I have to "stop" him money???? Please help!

...and apologies for what is probably a daft question.

Many thanks,
David

KiKi

As a non-VAT registered sole trader, when I invoice the Ltd companies I work with, I simply invoice with no VAT added. I don't know what it means for the Ltd company, but that's how I invoice.

InsideInsurance

The fact they arent VAT registered just means they cannot add VAT to their bill to you and you cannot reclaim any VAT from their services. Need to ensure when entering it into your accounting software that it is entered as the net value as some will by default assume there is VAT included

phill99

He invoices you in the normal way for the £2k. Whether he is vat registered or not is academic.

In terms of CIS, you must set yourself up to deduct CIS tax from any sub contractor you employ. HMRC have dedicated help line for this. Here's the website for you

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

Once you have set youself up to take off CIS payments, you have to get all of your sub contractors 'verified'. For this you need their name, NI number and UTR. This can be done on the phone and HMRC will give you a verification number.

If the sub contractor is known to them and is set up as self employed they will tell you to deduct 20% off of their labour costs. If the sub contractor is not known to them, it will be 30%.

CIS returns must be done monthly and run from the 6th of the month to the 5th of the next month.

So say in this month (Jan 2013) your subcontractor invoices you for £2000 for labour costs. Lets assume you have 'verified' him with HMRC prior to him starting working for you (best to do this). You then pay him 2000 minus 20% ie £1600. For the balance you issue him a tax voucher for the other £400. You the pay this £400 over to HMRC by 19th of the month.

This £400 voucher is then set against the sub contractors tax return in April and will be deducted off of any tax that he may owe to HMRC. If he has paidtoomuch tax, he will get a rebate in the normal way.

It can be a pain in the backside to take off CIS and its an added burden to you. However, if you fail to set up CIS the revenue are likely to refuse to allow the whole of his invoice and therefore YOU end up paying the tax for him!

If he has a CIS card he will be familiar with the system.

Remember also that the CIS tax only comes off the labour element of his invoice, so if he gives you n invoice of £2000 and £500 is for materials, you only deduct the 20% off of the £1500.