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  1. #1
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    Default Whose responsibility is tax when hiring sub-contractor?

    I am using a sub-contractor for some work, I have told him how I will need an invoice from him so I can put it in as an expense on my tax return which he said is fine but he has asked for it in cash. It got me wondering, if he doesn't file a return at the end of the year am I liable at all? It doesn't matter to me how I pay him and I'd rather keep him happy but if he didn't declare it and it leaves me liable then I will pay by BACS.

    I can't see how I would be responsible, just wanted to check though. Most the info on HMRC is about CIS and this isn't construction.

    Cheers


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    Banned Realist's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    Is this any good [Only registered and activated users can see links. ] and [Only registered and activated users can see links. ]

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    DF Super Moderator
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    Thanks but they are both CIS links too.


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    DF Moderator piggzy's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    My understanding is that if a sub contractor doesn't pay his due taxes then HMRC can chase it from the person hiring him.

    I suppose you could say they would be using you as his guarantor !! This was told to me by an accountant.

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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    I thought sub-contractor was the right term but maybe I'm wrong, if I get someone who is self-employed to do a bit of work and then I pay them when they invoice me. In the past I have used ex-BT engineers to do work on telephone lines, they do the job and then I pay them. In this case am I responsible if he doesn't declare it? I have no way of knowing if they do or they don't at the end of the year.

    I have emailed my accountant to ask him too so will post back the answer.


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    DF Wh0re Markymoo's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    I'm almost postitive BT engineers have to be reg CIS to do sub-contracting work.. That way you would verify them through the CIS system.

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    DF PlaYa DavidF's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    Well having been a subby in the construction trade for many years it was always my understanding that each individual is responsible for their tax....if they are truly self employed. If you are a company and are employing someone for a length of time even on sub contract terms.....HMRC could argue that you come under the "employer" title....then it is YOU as an employer who must deduct tax from your employees.

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    Mummy's little soldier I Black Belt's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    If your subby is CIS registered, then you have to deduct the tax element and submit to HMRC
    If you're paying cash, under the table as it were, then there's an argument as to whether he should be claiming his contribution and the vat element from you, on the principle that he isn't going to declare it.
    Morally I suppose, if he wants cash and you want an invoice, then he should either split the invoise down to show the contribution and the VAT and you could then pay it, safe in the knowledge that if you were challnged you could produce said invoice and explain you'd paid him both elements on the premise he in turn would make the necessary deductions himself.
    If morals aren't an issue, then you could just fail to submit the invoice to your accountant as part of your return.
    in simple terms and from experience, if he wants cash it's for a reason - probably to keep it out of the books.

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    DF PwNagE Mobileman's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    they are liable but you, not your roblem if they dont pay it last time i checked with my accountant for non employees, i doubt they will be CIS if just telephone / computer engineer

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    DF Super Moderator
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    The person I had in the past was ex-BT, having retired he deals with calls to run internal phone wiring, fault finding etc. so I doubt CIS stuff affects him now but I have no idea about this.

    I'm not VAT registered, I had planned to find a self-employed IT tech and have them fulfil some of my support requests then they invoice me for their time and I invoice my customer. The plan was to save me the hassle of having to set up payroll etc.

    Other company's occasionally bring me in to do some work for them on a job i.e. setting up routers to allow remote CCTV viewing, I then invoice the builder/electrician and they pay me, I deal with my own tax return and I imagine my invoice goes on their tax return as expenses. Is this not a 'legit' way of doing things or is this the right way but if I failed to put it on my tax return the builder could get in trouble?


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    DF PwNagE Mobileman's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    its fine mate as i understand it, i do similar myself and im also not vat reg, example below for what i do and accountant cleared it

    bob does a batch of subby worked on 50 repairs i pay him per repair which totals as example £500
    I pay him either £500 by cash or by bank transfer but this is covered off against his invoice eg BOB1 invoiced today

    now if he doesn't declare that invoice and pay his tax on it then that's his problem not yours if either of you were investigated.

    this is part of the reason CIS was introduced as too many people in construction industry dodging paying there tax due as YOUR not in CIS industry of scheme then its irrelevant, from a self employed point of view you have covered it off and much easier than employee someone and PAYE etc

    Thanks to Mobileman

    evilsatan (17th February 2015) 


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    DF PlaYa andmor's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    As your not VAT reg'd just make sure that anyone who does work for you and claims to be VAT reg'd so they add their extra 20% on top, are genuinely registered..

    Did a client's property accounts recently and a builders invoice had vat added on the total.. vat number was false, was the builder ripping him off... informed the client and he got the cash back

    Thanks to andmor

    evilsatan (17th February 2015) 


  13. #13
    DF PwNagE Geko's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    Now I am not completely aufait with the rules. And this doesn't help, because it's construction again. But my brother was talking about the need for all his subbies to be CIS registered and him having to take the tax at source. He wasn't happy, as it means he has to deal with all of that for the small percentage he makes on the work.

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    DF Jedi theodotcom's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    If they're self employed and they invoice you for work im pretty sure you are not responsible for their taxes, i've used freelancers for ages, they invoice me and i pay, my accountant has never had a problem with it.
    if they dont do their taxes it doesnt fall on you, you just paid an invoice.

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    DF PlaYa hoponbaby's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    As theodotcom has said as long as you have an invoice and no reason to believe they are anything but a legitimate self employed person then you are fine, HMRC won't be able to pursue you for any tax. You do ideally want something that looks legitimate - not a scribbled piece of paper.

    If it was within the construction industry then that's a whole different ball game.

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    DF Super Moderator
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    I spoke to my accountant and he said the sensible thing to do would be to request their UTR with their first invoice.


  17. #17
    DF PlaYa hoponbaby's Avatar
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    Not a bad thing to do but that in itself doesn't prove they're currently registered as self employed. Do you provide your UTR to customers?

  18. #18
    DF Super Moderator
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    I think his point was by requesting it you are helping cover yourself. I can't see how it is necessary at all because, as you say, I don't provide my customer with any form of proof.


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    DF PwNagE Mobileman's Avatar
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    Default Whose responsibility is tax when hiring sub-contractor?

    Yeah it's not necessary he's just trying to help cover the bases but as above I've never provided my utr to anyone ever, would I give them it?.... probably not as it's not required

  20. #20
    DF Super Moderator
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    Default Re: Whose responsibility is tax when hiring sub-contractor?

    Ok well tbh you have all helped me to confirm what I thought in the first place, outside of the construction trade an invoice should suffice. Thanks for the responses.


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