Making profit when subcontracting work out..!

[ukdan]

Hi everyone,

I've had a job come through which is going to be about a £10,000 job. I'm subbing the job out. But I'm hugely confused.

If my subbie quotes me £10k +VAT. I will be sending him £12k. Yes I can claim the 2k VAT back. But for me to make profit would it make sense that I charge £11k + VAT.

So I would receive £13200. Send him 12000.
Pay my VAT of 2,200.

Claim VAT back that I paid - £2000.

Profit £1000.

Is that correct?

 

[DWS]

Yes correct as long as you are VAT registered, also if this work is within CIS then there may be DRC involved

 

[UK Contractor Accountant]

Yes correct as long as you are VAT registered, also if this work is within CIS then there may be DRC involved

+ cis tax deduction on the subbie labour payment at 20% or 30%

 

[ukdan]

Very good point! It's within CIS.

Does CIS still apply if I'm subbing to a company? If you have a spare few minutes I'd really appreciate knowing how to integrate this within my costs/profit?

 

[UK Contractor Accountant]

Does CIS still apply if I'm subbing to a company?

yep unless they hold a gross payment certificate - you have to check with the CIS helpline before you pay them and they will tell you what rate to deduct - 0%, 20% or 30%.

you will also need to register as Contractor ( if not already registered) and also as a subcontractor if you take on subcontracted CIS work.

 

[DWS]

CIS should not impact your profit but it may do to your cash flow, are you are Ltd Company? Or gross status for CIS?
If not you may have a situation where you are having CIS deducted from your £11000 at 20% so £2200 leaving you £8,800 and having to pay £8k to the subbie and £2K to HMRC
If a Ltd you can off set this or if gross status then no CIS withheld, just a scenario to bear in mind.

 

[numbersrule]

Hi everyone,

I've had a job come through which is going to be about a £10,000 job. I'm subbing the job out. But I'm hugely confused.

If my subbie quotes me £10k +VAT. I will be sending him £12k. Yes I can claim the 2k VAT back. But for me to make profit would it make sense that I charge £11k + VAT.

So I would receive £13200. Send him 12000.
Pay my VAT of 2,200.

Claim VAT back that I paid - £2000.

Profit £1000.

Is that correct?

I agree with all the other posts and I know you may be giving these figures as a simplified example but your margin seems very low. Are you not providing any services or added value or time of your own to put more meat on the bone?