Accounting Software? - Construction CIS? VAT?

00ec25

Gareth83 wrote: »

00ec what do you mean by 100% deduction from the subbies? Surely it'll be 20% on their labour element?

I meant since your business model appears to be you provide the materials, the subby does the labour, then the subby invoice is labour only. So the whole (ie 100%) of that inv value is subject to CIS (at gross or 20% or 30% depending on their registration status once you have validated them as you are required to do)

Gareth83

That's true, but as I'm physically not doing any labour for the client what do I invoice them for instance?

Or am I charging for the labour my subby has done?

Of course my added value is in the project management so do I class that as labour for CIS purposes?

00ec25

last post on this thread as it is clear you have done no research yourself yet think you know it already. You say you are a QS, yet you then ask what is the relationship of the contract sum to the invoice !!!!

define what a contractor is and why you think you are not one?
Hint: what is a project manager and what do they do in relation to construction projects

https://www.rjp.co.uk/clarifying-common-cis-mistakes-for-construction-companies/

Gareth83

I've never said I'm a QS? I said I've priced jobs...

I haven't said I'm not a contractor either I think my questions have been taken out of context

1. I was simply questioning if CIS works itself out over a year same as PAYE does for instance regardless of the amounts paid/received.

2. I was trying to ascertain what % split I should be putting down to my client considering on a £5000 job which I've just completed that has cost me £1000 in labour to my subbie, ~£1500 in materials.

Am I therefore charging £1500 materials/£3500 labour?

It's not that I'm out of my depth I've just literally never dealt with CIS as I've always been PAYE myself and the accounts team always did CIS deductions etc.

Good link though, answered a few extra queries. Many thanks

BoGoF

You are out of your depth, otherwise you wouldn'tbe asking the questions you are.

You are trying to do this on the cheap by asking random strangers.

If you get this wrong HMRC will be all over you....as will your subbies.

comeandgo

Gareth83 wrote: »

I've now setup Freeagent as recommended. I found (on the actual website) that if I pay 5 months upfront I get 12 months. Sounds good to me! Having a quick play around it looks very simple and straightforward.

A few questions:

Is it worth registering for VAT even though I don't actually know my anticipated income as yet? My accountant suggested for simplicity not registering unless I really need to or a client specifies I must be VAT registered.

However, already I have a £5000 (net) job allocated to me from my client. If I was VAT registered I could be allocated the full amount £5000 + VAT, the labour I have to pay out is £2000 and materials have cost me £1500 (inc. VAT)
Surely in these circumstances being VAT registered would be beneficial as a) I'm getting paid more and b) I can reclaim the VAT on materials

In part of that I got allocated £400 for one lot of materials, plus VAT if I was VAT registered. The materials actually cost me £400inc VAT so I see that as I lost out on that particular element?


I also don't think you understand VAT, if you are VAT registered you don't get "paid more". You look after the VAT element and then usually hand it straight back to HMRC less any vat on your business purchases.

Gareth83

Okay so in this scenario then I'm allocated a job at £5000

Labour has cost me £2000
Materials £1500

Ignoring CIS, gross profit = £1500

Or if VAT registered then job value = £6000 Inc VAT
Labour £2000
Material £1500
Gross profit = £2500
Vat received = £1000, VAT to claim = £250, VAT owed £750
New profit = 6000 - 2000 - 1500 - 750 = £1775

So surely in my circumstances being VAT registered is more profitable by £275 on this one job? This is how all the jobs will work pretty much.

Not sure why this is deemed out my depth?

Now in my next example looking at one item in isolation, I can be allocated the job value for materials at say £400 net

Job value £400 including allowable uplift on net value of materials of 10%
Material cost £436.37 = (400/1.1) * 1.2
Profit/Loss = loss of £36.37

But if vat registered

Job value £480
Material cost £436.37
VAT bill = £80 - £72.73 = £7.27
New profit = 480 - 436.37 - 7.27 = £36.36

So better to go VAT registered....

Why does this make me out of my depth?

00ec25

Gareth83 wrote: »

Why does this make me out of my depth?

because you do not understand the difference between (taxable) profit and mere cash movements in and out

Gareth83

Can you elaborate?

I'm talking about VAT...

VAT payable is the difference between VAT received and VAT paid out. The difference goes to the Government...

In both circumstances I have used as examples above I make more 'gross profit' by being VAT registered. Correct or not?

Why would I want to be allocated a job for instance at net value that I then have to incur VAT on the cost of materials? I'd be making a loss of ~£36 on a £400 material item...

My advantage of being VAT registered is my customers are VAT registered, my suppliers (labour force) aren't but my materials are.

If my calculations above are wrong please tell me then? I have no issue owing VAT to the VAT man but overall I am better off...

Please explain further?

ComicGeek

Gareth83 wrote: »

In both circumstances I have used as examples above I make more 'gross profit' by being VAT registered. Correct or not?

Not correct. You're collecting the VAT to pass onto the Government, it doesn't form part of your profits. Your project isn't now magically worth £6000 - it's still £5000, but with the VAT added that you're collecting on behalf of the Government. The true saving is the ability to reclaim the VAT on materials purchased, so the difference is £250 not £275 as per your calculation.