Self employed construction

biscuit1_2

Hi all was wondering if you could help me with some advice, my son started a new job with a company working self employed in the construction industry, he is registered with HMRC and pays 20% tax from his wages, he recieves a monthly wage statement with earnings and tax paid, he is currently travelling 85 miles a day to and from the job in his own car, is this tax deductable and at what rate, i have seem 45p mile is this correct or does this class as commuting ? . When we say tax deductable are we saying total earnings minus tax deductable and tax paid on the rest or have i got that wrong, apart from the obvious things like boots and clothing are there any other simple things he should be looking at to help with the tax, we are keeping a record of where he is travelling regarding milage and keeping recipts. CHEERS

Aquamania

biscuit1 wrote: »

Hi all was wondering if you could help me with some advice, my son started a new job with a company working self employed in the construction industry, he is registered with HMRC and pays 20% tax from his wages, he recieves a monthly wage statement with earnings and tax paid, he is currently travelling 85 miles a day to and from the job in his own car, is this tax deductable and at what rate, i have seem 45p mile is this correct or does this class as commuting ? . When we say tax deductable are we saying total earnings minus tax deductable and tax paid on the rest or have i got that wrong, apart from the obvious things like boots and clothing are there any other simple things he should be looking at to help with the tax, we are keeping a record of where he is travelling regarding milage and keeping recipts. CHEERS

Commuting is not tax deductable.

Hoiwever he should have a tax free personal allowance. Not sure why therefore your son is paying 20% tax on all his earnings. :huh:

An accountant's fees are tax deductable too - perhaps he should look into that

AbbieCadabra

20% from his wages would probably be CIS deductions in this instance?

is he really self-employed? might be worth checking here.

biscuit1_2

He is self employed as far as the employer is concerned, no holidays or sick pay and has to submit a self assesment, he is in the building enviroment so yes CIS, he doesnt set rates or dictate when or how the job gets done. So travelling to and from a job is not tax deductable, umm so when is it tax deductable, he isnt travelling to the office he is given a destination to go and has to use his own transport to get there so this must surley be a cost.

AbbieCadabra

The employer doesn't decide if he's self employed, the circumstances & HRMC rules do. Probably best to get that sorted 1st before querying travelling expenses, a call to HMRC perhaps would help?

Estateprincess

I do a bit with CIS and it is simply a scheme for the construction industry that deducts a percentage of tax at source from Sub-Contractors no matter if they are Self Employed or Limited Companies, unless they have “Gross” status when verified by the contractor via HMRC.
As AbbieCadabra’s links show there are often concerns as to whether certain individuals are Self-employed and your son should check the terms of his contract and the ESI tool in the link. Lots of individual Sub-Contractors probably should be employees but there you go!

Anyway, if he is classed as self-employed he should keep all receipts relating to anything to do with work, so tools, petrol/diesel, vehicle maintenance & insurance, mobile phone if he uses it to make work calls etc. I advise my clients to get a box and put it by the front door and then regularly empty their wallets into that so nothing gets lost!

He then totals up all his income for the year and deducts the expenses. Things that are wholly and exclusively for work can be deducted at 100% whereas other things like fuel and mobile phone bills will have various elements of personal use so should be proportionally deducted.
For example if he uses his vehicle 50% of the time for work he can claim 50% of the value of the fuel he has used.

He should end up with a simple “Income & Expenditure” which shows his Gross Income (before the CIS Tax is deducted) less his expenses. This will give his “Surplus Income”, his personal tax allowance is deducted from this and he is then taxed on the remaining.
He MUST keep the deduction statements from the Contractor as these are proof of the tax he has already paid. This tax will be deducted from his total liability so he needs to be able to prove it has been deducted at source.

This is a basic overview and I would strongly suggest that he speaks to an accountant with knowledge of CIS. It is likely that they will save him more than their fees each year as they know exactly what can and can’t be claimed and will stop him missing things he could be deducting. His fellow Sub-Contractors could probably recommend someone to him.

HTH

biscuit1_2

Ok so he's classed as an employee, so he has to burden the cost of his own travel, so when he has to submit his tax return its just a case of deducting his personal allowance and national insurance from earned wages

DCodd

In most cases a simple contract is enough to settle the employment status issue. It is the Company that bears the major responsibility for employment status as it is they who benefit the most from the arrangement as in no statutory holidays, paternity, sick and Employers NI etc and if they have any sense they will have insurance in place for if and when they get inspected.

Estateprincess

biscuit1 wrote: »

Ok so he's classed as an employee, so he has to burden the cost of his own travel, so when he has to submit his tax return its just a case of deducting his personal allowance and national insurance from earned wages

An employee will have Tax and National Insurance deducted at source through PAYE by their Employer.

Again I would strongly suggest speaking to HMRC or an accountant as it is hard to give valid advice without knowing all of the information. You need to read the contract very carefully and have a full understanding of the circumstances under which he is working.

DCodd

I would strongly suggest you do not speak to HMRC. They WILL tell you that your Son is an Employee. If you feel the need to speak to someone, make it an accountant who knows about the CIS scheme.

What work does he actually do?

AbbieCadabra

DCodd wrote: »

I would strongly suggest you do not speak to HMRC. They WILL tell you that your Son is an Employee. If you feel the need to speak to someone, make it an accountant who knows about the CIS scheme.

What work does he actually do?

if an employer is taking the risk of breaking the rules & treating someone as self-employed, when they probably know that they should be an employee (with far more rights/benefits etc.), why shouldn't HMRC get to know about it? as you've already said, it will the employer that's in the wrong...

the employee is looking for advice & calls HMRC, during the call the full facts come to light - nothing wrong with that as far as i see it.