Few questions about self-assessment

MamaMoo_2

Asking for my brother.
He recently started work as a sole trader subcontracting for a large company. 20% tax has been paid at source under the CIS.
Two questions really

1) when declaring income on the self assessment at the end of the tax year, does he declare the amount earned or the amount paid? (He invoices and is paid 28 days later. By the end of the tax year he'll have done about 20 weeks work, but will only have been paid for 16, which figure does he declare?)

2) he has spent a couple of thousand pound on workwear and tools. Can he claim this back, if so how? He's doing it all himself, no accountant, and I'm afraid that the whole HMRC website has just got me a bit confused, and he's got no idea.

Anything else you need to know to help answer, please ask, not sure how much info etc. is needed
Sorry if I'm a bit useless!

chrismac1

If I were hiim I would hire an accountant, there are lots of traps for the unwary and it is the sector of the economy most likely to see fines and enquiries. This is why the CIS deduction scheme exists - because of the perception of "moonlight flitters" HMRC gets to take too much tax out at source, then the legitimate subbies can claim back the excess tax after the tax year ends.

To answer the specifics:

1. He declares every invoice he's raised dated 5 April 2013 or earlier.
2. If his gross invoice - excluding materials - was 1,000 that is what counts as his income even though his payment will have been just 800.
3. There is a special box on the self-employment section for "CIS deductions" in which he can include every 20% deduction amount for all deduction statements dated 5 April 2013 or earlier.
4. He can claim capital allowances on the kit purchased. Other typical expenses are motoring, telephone, use of own home, protective clothing.

If he does this himself and screws it up, he needs to realise that HMRC can hold up these refunds for well over a year.

Pennywise

Just to go a little further to Chrismac's excellent post:-

It's not just the value of invoices raised in the year, it's the value of work done, so don't think you can simply raise invoices late to avoid them being taxable in the year the work was done.

Re protective clothing - it does need to have a purpose other than keeping you warm and decent. Steel toed boots are OK, as are fluorescent jackets and and hard hats, but "normal" clothing items such as jeans, polo shirts, jackets, etc aren't an allowable expense even if you only ever wear them for work.

Another option that is allowable is "advertising/uniform", so you'd be able to claim for polo shirts with the business logo embroidered onto it, or jackets with the business name on the back etc - but probably not relevant for a single subbie.

chrismac1

To the OP, once your friend has digested both the above posts one of two things will have happened:

1. Either he'll be 95% plus confident of being able to put together a credible tax submission which will stand up to HMRC scrutiny, or

2. He'll not be that confident and start calling round a few accountants.

Just Google "CIS repayments accounting web" if you think I'm making up the scare stories on this one!