Contractors & CIS deductions HELP!

[RMCN]

Hello, need some help please.
I am currently a sole trader, CIS, sub contractor and about to set up as a contractor to take on work myself.

I have been told by HMRC that once I sign up to be a contractor I am liable to take the CIS deductions from my sub contractors (1 guys who work along side me for day rate fee).

Now, when I hand an invoice into my contractor (whom I am a sub contractor too) they will deduct my CIS at source.
This invoice will include my rate and the other guys too, leaving me out of pocket??

Can this be right??

Eg.
Invoice £1000
CIS 20% = £200
Remaining =£800

Subcontractors invoice (comes to me)
Invoice £500
CIS 20%=£100 (I have been told to pay this on the 19th of each month for my sub contractor)
Subby recives £400

That leaves me with
800 - 100 - 400 = £300
For all my extra time and effort.
Why am I out of pocket until the end of the financial year when I “might” be due a tax refund.

This system is clear as mud or have I been doing something wrong?
Is there a better way to do things?

Thanks in advance
R

 

[SteveJG]

Nope, you put it all down each month

CIS suffered
Against
CIS deducted

And then just pay the difference. (Your accountant should be able to sort this for you) Also if he subcontracts to you full time then you should be employing him

 

[UK Contractor Accountant]

Not able to offset the CIS Suffered against CIS deducted monthly unless you are trading as a Limited Company.

 

[NicoJ]

You may be able to apply for gross status (so there are no deductions from your income), if your turnover is over £30k. The flip side of this is that you will have to pay tax at the end of the year.