subcontracting and tax... help?!!!!


Postby AdamsHeating » Tue Jan 20, 2009 10:17 pm

Hello my faithful friends. I have a little query and unfortunately google or HMRC haven't turned up the goods.

I am self employed but I recently started sub-contracting on a day by day basis with a local firm. I use my own van and tools for this and they pay for the expense of this £20 per day. This obviously covers what I pay in insurance, service etc, etc and saves me using one of their vans with inadequate tools in it!

They pay my wage less 20% as per CIS but for some reason, the £20 per day to cover my vehicle comes through untaxed.

Why is this? What implications does it have? I obviously need to account for the Tax on this amount seperately through my books?

I liked the old way of balancing what I earned against what I paid and taxing what is left over!

Cheers for the help,

AH.
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Postby AdamsHeating » Sat Jan 31, 2009 2:12 pm

hiya,

I have tried that and there is no answer for me!

Is there anyone out there who knows or will I have to consult an accountant?!

cheers,

AH.
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Posts: 121
Joined: Fri Aug 08, 2008 10:49 am


Postby Perry525 » Mon Feb 02, 2009 6:55 pm

Have a word with your local Inland Revenue, they are very helpful.
While you are there, ask about the expences you can claim, they will tell you what other people doing similar jobs claim, this can save a lot of money and worry.
Mine even go to work early to meet me.
Make sure you are registered for VAT, when times are good or bad it makes a difference.
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Joined: Fri Jul 06, 2007 7:35 pm


Postby plumbbob » Fri Feb 06, 2009 6:42 pm

Not sure if the same rules apply for the CIS scheme as a lot of the rules regarding this odd arrangement for employment are different to standard employer/employee.

In normal employment, fair "expenses" can be reclaimed from the employer for any outlay by the employee for such things as travel expenses (fuel, wear and tear etc (normally paid per mile)), entertainment, meals, hotel costs etc and as there is no gain involved, are tax exempt from the Revenue point of view.

For yourself, it is slightly different, being self employed, you are probably booking all your expenditure anyway, and you obviously cannot deduct that from your income AND claim it back from your employer.

To ensure of accuracy, you must either not enter the relevant input receipts (which is nigh on impossible if you are using the van for other business), or enter the monies received (£20) as normal income.

I hope my rabbiting makes sense?
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Postby elwood » Fri Feb 13, 2009 9:49 pm

Hi

Google UTR number

(UNIQUE TAX REFERENCE)

Bye
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Postby demon » Wed Mar 04, 2009 5:23 pm

I'm in a similar situation and the people I work for pay my out of pocket ex's separately from my income. It's all detailed on my invoice I just deduct my tax at the bottom eg if you've earnt £100.00 and you've agreed £20 ex's for your van then your invoice would be for £120 and the taxable element on the £100 labour (currently 20%) would come off at the end.
eg
wages £100
ex's £20
subtotal £120
VAT@15% £18
Total invoice =£138
less tax on labour element of £100 @ 20% = £20
Total payment from the contractor = £138 - 20 = £118.00

Hope this helps
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Posts: 13
Joined: Mon Mar 02, 2009 11:04 am


Postby estra7 » Thu Mar 19, 2009 1:36 pm

Hi

The 20% tax should only be deducted from the labour element of your invoice. That is why you receive the expenses in full. If you provided materials in doing the job the 20% tax should not be deducted from that either.
You could either show the expenses received as other income or reduce your van expenses by them.

Cheers
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Joined: Mon Oct 06, 2008 2:45 pm


Postby demon » Thu Mar 19, 2009 8:17 pm

which is exactly what my example demonstrates :D
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Postby Raj Patel » Fri Apr 17, 2009 8:16 pm

[quote="AdamsHeating"]Hello my faithful friends. I have a little query and unfortunately google or HMRC haven't turned up the goods.

I am self employed but I recently started sub-contracting on a day by day basis with a local firm. I use my own van and tools for this and they pay for the expense of this £20 per day. This obviously covers what I pay in insurance, service etc, etc and saves me using one of their vans with inadequate tools in it!

They pay my wage less 20% as per CIS but for some reason, the £20 per day to cover my vehicle comes through untaxed.

Why is this? What implications does it have? I obviously need to account for the Tax on this amount seperately through my books?

I liked the old way of balancing what I earned against what I paid and taxing what is left over!

Cheers for the help,

AH.[/quote]

20% CIS is an obligatory deduction on labour element. You should receive a certificate of the tax deducted from the main contractor and this will be treated as tax paid in 'advance'.

Your accountant will gross up the cash you receive with the CIS deduction and off set your trade expenses against the 'gross' income. Tax is then calculated against net income which is taken from the CIS deductions and the remainder will be refunded to you.
Raj Patel
Posts: 10
Joined: Fri Sep 05, 2008 7:41 pm


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