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Subcontracting double taxing HMRC - any help appreciated!

(6 Posts)
lphi22 Fri 13-Jul-18 12:24:58

Hi all,

Sorry don't really know the mumsnet lingo very well but here goes..
My DH has his own decorating company and is now registered with hmrc as an 'organisation' as he employs two others.

He is subcontracted by a large construction company probably 70% of the year (has his own jobs the other 30). When the construction company sends his pay over weekly it includes pay for DH's employees and it has ALL been taxed at 20%. So he gets it all as one chunk and I send over the employees pay from DH bank account.

I then go to input his employees payroll info on the HMRC software and HMRC will then tax the amount again.

Sorry if i'm totally missing something here, but i'm just wondering how I get around the employee's wage being taxed twice, or is that something that you have to do and claw back in the tax return?

When you go into 'calculate amount due to HMRC' there is an option to enter an amount already deducted via CIS, do I possibly enter the tax already deducted here?

I've literally googled the balls out of this and can't get my head around it.

Any help would be MARVELOUS!!

Thank you!

OP’s posts: |
Ta1kinpeace Sun 15-Jul-18 13:39:27

OK, its the land of CIS in and out.

His CIS contractor certificate is a net one so he gets 20^ deducted of all the labour he charges.
His subbies also get 20% deducted off their labour by him.

So, he bills the client £1000, they deduct £200 in CIS and pay him £200

To do that job he paid his boys £200 each, of which he deducted £40 from each in CIS
(the rest of the job he did or was materials)

So, each month he submits his CIS return showing the two lots of £40 for each of the boys
so he owes £80 to HMRC and pays it

so it goes on during the year .... he is out of pocket

when he submits his tax return, he declares all of the tax that has been taken off him (the blocks of £200) and offsets that against his tax bill

Ta1kinpeace Sun 15-Jul-18 13:40:31

The OTHER way to do it
but you need REALLY good ledger records for this one
is to not pay across the blocks of £80
and then only balances of £120 will go against his year end return

Ta1kinpeace Sun 15-Jul-18 13:41:57

Either way around, if he's taking on subbies GET AN ACCOUNTANT to advise / support you grin

PS the subbies are NOT employees - make sure you enter them on the right parts of the return or you will get clobbered for NI

AlexanderHamilton Sun 15-Jul-18 13:47:31

Can I clarify?

He subcontracts as a sole trader but he pays his staff as employees on PAYE?

This is very common. He needs to build in employer tax & national insurance into the rates he charges the main subcontractor. The 20% CIS that is deducted will be offset against his tax bill at the end of the year.

If however he pays his staff as sub contractors under CIS then the 20% he deducts & pays across to HMRC on his monthly return will be offset against their tax liabilities at the end of the year.

He can apply for gross status but you generally need a certain level of turnover & a good history of record keeping/on time payments.

Ta1kinpeace Sun 15-Jul-18 13:52:35

If he is a sole trader subbie with employees
he can offset CIS deducted from him each month against his PAYE bill

its Limited Companies that have the huge problem getting their CIS back as it cannot be offset against CT

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