Best advice Lee is speak to a decent accountant used to dealing with it, personally I think you’re over paying/paying twice. My lads where always paid gross and left to sort their own taxes out so I’ve no experience I’m afraid.
A thing that has been bothering me for a while and it kind of came to a head with the realisation that any government assistance is pretty much dead in the water.
My business is 95% labour only . I subcontract to various companies who subtract my 20% CIS tax at source.
I have two guys who work with me , but aren’t employed by me , so are subcontractors in their own right.
My issue is that after the initial CIS tax has been deducted, I’m then paying it for the two guys.
My argument is that surely the labour element has already been deducted from the initial price of the work . This is something that I can’t get my head around . I’ve spoken to HMRC , who were less than helpful and even my bookkeeper was unsure .
Whilst things were good, I kind of buried my head in the sand but I’m thinking now that if Im overpaying the tax , I should explore avenues to recoup what I’ve put in.
Bearing in mind that most months , my CIS bill is upwards of £800 ( after the initial deductions) it still rankles me .
My thinking is that if I made the two guys partners in the business , then the extra CIS bill wouldn’t be applied.
For info, I’m a sole trader , not limited .
Over to you guys .
Best advice Lee is speak to a decent accountant used to dealing with it, personally I think you’re over paying/paying twice. My lads where always paid gross and left to sort their own taxes out so I’ve no experience I’m afraid.
Cheers Steve.
I’ve come to the realisation that my accountant is next to useless . I did ask at another accountants office I was working at and , they too seemed unsure.
How’s things with you ?
Hope you’re well you Scouse c##t .
I hear your reputation precedes you on the Mcr gettogether 😂. Be good to catch up soon.
As a subcontractor you bill the contractor for the full amount and the tax deducted is allowed as a credit against your SA tax bill.
As a contractor you then deduct from the payments you make to your subcontractors and that is deducted from your business income in calculating your profit (and allowed as a credit against their SA tax liability).
As mentioned you could apply for gross payment status to help with your cash flow, if you meet the criteria, but the net tax you pay would be the same -
https://www.gov.uk/what-you-must-do-...payment-status
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I think the op is concerned that when he gets paid from his invoices, the element that he pays to his subbies has already been taxed at 20% before it goes through his business.
If he has the gross amount - he would be up 20% of what he uses to pay them (this would be taxable profit, but overall he would be better off) - is he incorrect in this thinking?
It sounds like this is accurate.
My wife is a chartered accountant and has picked up a lot of work from people recently who realised that those who they were employing as accountants were really just book-keepers who were adding numbers up and uploading accounts. They've been useless in the crisis.
Recent circumstances has shown that if you want a proper accountant you need to pay for one. They've been worth their weight in gold lately.