Paying a sub contractor

[laurenrocky]

Hello,

I’m currently helping my partner with his self assesment return!

He has taken on a sub-contractor who has a UTR number and would like his tax deducted from source! My partner is a sole trader!

I’m unsure on the correct steps he needs to take to me able to deduct the tax from his sub contractor!

I believe firstly he needs to register as an employer and get a PAYE number?

Then does he need to register under the construction (CIS) so his able to deduct payments?

Also does this need to be done through an official payroll system to be able to submit reports to HMRC?

 

[DWS]

He needs to register with HMRC as an Employer and then say 'yes' when asked 'are you going to engage sub-contractors in the construction industry'
I submit monthly CIS returns for my clients through software but I am sure he can submit through his HMRC Business Tax account after adding CIS, he will also need to verify the sub-contractor with HMRC to find out the rate in which to tax them.
Problem he may have is cash flow, if he is having 20% deducted from the Contractors engaging him and he then has to deduct 20% from the Subbie, he may find himself with reduced cash flow until the end of the tax year and submitting his tax return.

 

[NicoJ]

He needs to register with HMRC as an Employer and then say 'yes' when asked 'are you going to engage sub-contractors in the construction industry'
I submit monthly CIS returns for my clients through software but I am sure he can submit through his HMRC Business Tax account after adding CIS, he will also need to verify the sub-contractor with HMRC to find out the rate in which to tax them.
Problem he may have is cash flow, if he is having 20% deducted from the Contractors engaging him and he then has to deduct 20% from the Subbie, he may find himself with reduced cash flow until the end of the tax year and submitting his tax return.

You used to be able to register a CIS only scheme (useful if you only have sporadic subbies and no staff). I'm not sure if that is still an option though?

 

[laurenrocky]

You used to be able to register a CIS only scheme (useful if you only have sporadic subbies and no staff). I'm not sure if that is still an option though?

Thank you so much!
Would he need an invoice from the Sunnis? And then supply a pay slip to him?

 

[NicoJ]

Thank you so much!
Would he need an invoice from the Sunnis? And then supply a pay slip to him?

Yes you need an invoice. You supply them a payment and deduction statement (to show how much you have deducted from them). There are examples on HMRC I believe.

 

[DWS]

You used to be able to register a CIS only scheme (useful if you only have sporadic subbies and no staff). I'm not sure if that is still an option though?

Is that not the same route as I suggested but you just put 0 for employees?
That’s what I have always done in the past.

 

[Newchodge]

Hello,

I’m currently helping my partner with his self assesment return!

He has taken on a sub-contractor who has a UTR number and would like his tax deducted from source! My partner is a sole trader!

I’m unsure on the correct steps he needs to take to me able to deduct the tax from his sub contractor!

I believe firstly he needs to register as an employer and get a PAYE number?

Then does he need to register under the construction (CIS) so his able to deduct payments?

Also does this need to be done through an official payroll system to be able to submit reports to HMRC?

If you are in the construction trade you MUST deduct 20% or 30% tax from any sub contractors. Register for CIS, check that the sub contractor is registered and follow the CIS instructions.

If you (or the specific job) are not covered by CIS then you cannot deduct tax from your sub contractor.

 

[Newchodge]

Is that not the same route as I suggested but you just put 0 for employees?
That’s what I have always done in the past.

Wouldn't you have to send a nil RTI every month, even if there is no work?

 

[NicoJ]

Is that not the same route as I suggested but you just put 0 for employees?
That’s what I have always done in the past.

No. With a CIS only you do not have to submit any payroll at all. If you have a period where you don't have subcontractors there is a tick box to say you don't intend to have subcontractors meaning you can pause submission for up to 6 months (which you can't do with payroll).

 

[DWS]

No. With a CIS only you do not have to submit any payroll at all. If you have a period where you don't have subcontractors there is a tick box to say you don't intend to have subcontractors meaning you can pause submission for up to 6 months (which you can't do with payroll).

But as long as you show no employees you are only set up on the CIS scheme so only need to submit the CIS return monthly no RTI needed, you can tick the box showing no subbies for 6 months in the CIS return if that is the case.
You need to register as an employer to get the PAYE reference and the Accounts Office reference

 

[NicoJ]

But as long as you show no employees you are only set up on the CIS scheme so only need to submit the CIS return monthly no RTI needed, you can tick the box showing no subbies for 6 months in the CIS return if that is the case.
You need to register as an employer to get the PAYE reference and the Accounts Office reference

That wasn't my understanding - which is why I asked whether it was still possible.

A CIS only scheme generates the relevant references without the payroll element. It used to be an X scheme if I remember correctly.

 

[laurenrocky]

Yes you need an invoice. You supply them a payment and deduction statement (to show how much you have deducted from them). There are examples on HMRC I believe.

Perfect, thank you for your help

 

[MyAccountantOnline]

Hello,

I’m currently helping my partner with his self assesment return!

He has taken on a sub-contractor who has a UTR number and would like his tax deducted from source! My partner is a sole trader!

I’m unsure on the correct steps he needs to take to me able to deduct the tax from his sub contractor!

I believe firstly he needs to register as an employer and get a PAYE number?

Then does he need to register under the construction (CIS) so his able to deduct payments?

Also does this need to be done through an official payroll system to be able to submit reports to HMRC?

If your partner has an accountant ask them for advice.

If not this is a good place to start for information https://www.gov.uk/what-is-the-construction-industry-scheme that tells you what work is and isnt covered by the CIS scheme.

 

[NicoJ]

This is what I was talking about. Note you can't then use this scheme for payroll at all so may become an issue if you intend to grow the business and employ staff in the future.

PAYE20165 - Employer records: set up employer record: XP scheme - contractor only (no employees) - HMRC internal manual - GOV.UK

www.gov.uk

 

[DWS]

This is what I was talking about. Note you can't then use this scheme for payroll at all so may become an issue if you intend to grow the business and employ staff in the future.

I just tried on my agent account to 'register a client for new taxes' and it only takes me to the register as an Employer page as I described above.
Tried as a sole trader and it took me to the same page, not saying it cannot be done as you say, but I have only done it for my clients the way I said through registering them as an Employer through my agent account.

 

[NicoJ]

I just tried on my agent account to 'register a client for new taxes' and it only takes me to the register as an Employer page as I described above.
Tried as a sole trader and it took me to the same page, not saying it cannot be done as you say, but I have only done it for my clients the way I said through registering them as an Employer through my agent account.

I used to phone HMRC to register and I still advise people do that now. HMRC will sometimes say they can't do it but they can.