Outsourcing as sole trader?

[pixidust]

Hi Guys,
I've recently registered as a sole trader and work with websites ( as in website sales, purchases and management) but my clients regularly assume I am a designer and ask me to 'make' them a site.

While I have the ability to do so I dont have the time. If I choose to outsource this work to india/australia would I just pay tax on the markup I add or would I be taxed on the full amount received?

e.g Receive £1000 from client, Pay designer £600 to complete leaving £400 profit.

My understanding is that sole traders only pay tax on profit but this seems like abit of a grey area to me. If I am just paying tax on the £400 then how would I need to account for this in my books? Is it a normal expense? Would I need to get an invoice with it being international and so on?

Any help at all on this would be greatly appreciated as I currently feel like I could be losing out on quiet abit of money!

Kind Regards,
Pixidust

 

[Scalloway]

To make sure that the tax man accepts it as a legitmate business expense you must have an invoice from the business doing the work for you.

 

[David Griffiths]

It's the same as any other business expense, and the fact that it's from overseas doesn't alter anything.

You should have some evidence of the work done and the cost. An invoice is the obvious (and simple) answer, so you should specify that you are going to want one at the outset. You are the piper and should call the tune.

In cases where there is no invoice, there will be an email trail showing agreement for the work, who is the supplier etc. Keep that, and it's odds on that the payment will be made by international bank transfer, which also helps

 

[MyAccountantOnline]

...would I just pay tax on the markup I add or would I be taxed on the full amount received?

e.g Receive £1000 from client, Pay designer £600 to complete leaving £400 profit.

My understanding is that sole traders only pay tax on profit but this seems like abit of a grey area to me.

Yes you are correct you only pay tax on the profit you make so the design fees you pay (and all other allowable business expenses) reduce your tax liability.

 

[DeanCo]

As you are just starting up I would recommend the following link: http://www.bytestart.co.uk/ which is very good resource for beginners and has just about everything you need to know.

 

[pixidust]

Thanks for all your responses; they're greatly appreciated! I've now pushed forward with this and have added a valuable extra dimension to my business!

Again, much thanks!
Pixidust

 

[himanshujain]

While I have the ability to do so I dont have the time. If I choose to outsource this work to india/australia would I just pay tax on the markup I add or would I be taxed on the full amount received?

t

I was just wondering about outsourcing to Australia. Does that comes cheap? Asking because so many Australian companies, in turn, do outsourcing to countries like India.

 

[pickaweb]

Hi,
This would be another business expense.
You just need to make sure that anyone that does any work for you no matter where in the world they are located they provide you with an invoice for their services.
Hope this helps.
Kind regards

 

[MyAccountantOnline]

You just need to make sure that anyone that does any work for you no matter where in the world they are located they provide you with an invoice for their services.

It's not essential to have an invoice but preferable - HM Revenue & Customs have some guidance here on record keeping.

Sometimes it isnt possible to obtain an invoice - that doesnt mean an expense can't be claimed.