Sub-Contractors
Sub-contractors operating in the Construction Industry need to be aware of how they will be treated for taxation purposes.
It is the sub-contractor’s responsibility to register as such with HMRC to ensure standard tax deduction treatment (20%), or gross treatment (if you are eligible for it) rather than higher rate deduction (30%).
The way in which you register as a sub-contractor differs depending on whether you operate as a sole trader or a limited company. We can assist with whichever process is applicable to your trading style.
Once you start to receive payments from contractors with CIS deducted, you must ensure that you retain all CIS tax deduction certificates. You will need them to file your annual personal tax return.
Most CIS sub-contractors operating as sole traders will be entitled to a repayment of some of the CIS tax withheld from them throughout the tax year. Ensuring that all relevant claims are made can maximise this repayment. We can handle this entire process for you, prepare and file your self assessment tax return and arrange for the tax to paid directly into your bank from HMRC.
VAT – considerations for both contractors and sub-contractors
Under construction contracts, the treatment of VAT differs depending on who is being invoiced. If the invoice is being raised between two VAT registered construction businesses, neither of which are the “end user”, the VAT should be ‘reverse charged’ on the invoice (effectively resulting in zero VAT being charged).
The VAT is charged only when the work is invoiced to the end user (so the customer for whom the overall works are taking place).
This is a relatively new area of CIS taxation and is still not very well understood or implemented within the construction industry.
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At TaxGem™ we can set up your bookkeeping software (Sage) in a way that makes this process fail safe, by linking the correct VAT codes and treatment to customers or suppliers depending which link in the construction process each entity represents.