Tax stopped at source for my subcontractors

Question asked by Jamie Oliver 8 years ago

Hi I'm am new to using ClearBooks and before I start entering all the data I just want to make sure I am doing it correct.

I am both contractor and subcontractor in my business. I see that if I am in the subcontractor role I enter my invoice into sales and put it under the code CIS labour revenue. When the payment comes in via banking its all correct and tax has been stopped at source. I then have to pay "my" subcontractor (now playing the role of contractor) so I put an bill in and put the code CIS labour cost which also then has the correct payment when coming to the banking side.

My confusion is that I am putting an invoice in for me and my subcontractors and all tax is stopped at source, so I am not really the one paying CIS tax for my subbies. If it then gets submitted to HMRC that I have stopped £200 say, I don't want to have to make that payment as its been stopped by the contractor. I hope this makes sense.

Thanks

Carly

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3 Replies

Hi Carly

Your ability to offset the tax you suffer (as a subcontractor) against the tax you deduct from subbies as a contractor, depends on your business status.

If you are a Ltd company then, when you go to account each month for the tax you've deducted then you can set off and tax you've suffered. If on the other hand you are self employed (or a partnership) then you income, as a contractor is personal self employed income and you pay your tax on that annually and so this is when you are allowed to deduct any tax suffered on that income.

In other words, self employed people do indeed have to pay over tax on subbie payments each month but wait till 31 January to get a credit for the tax they have suffered up front.

Here's a link to the HMRC page: https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor/pay-tax-and-claim-back-deductions

Hope that helps.

Best answer
8 years ago

Hi Carly

Your ability to offset the tax you suffer (as a subcontractor) against the tax you deduct from subbies as a contractor, depends on your business status.

If you are a Ltd company then, when you go to account each month for the tax you've deducted then you can set off and tax you've suffered. If on the other hand you are self employed (or a partnership) then you income, as a contractor is personal self employed income and you pay your tax on that annually and so this is when you are allowed to deduct any tax suffered on that income.

In other words, self employed people do indeed have to pay over tax on subbie payments each month but wait till 31 January to get a credit for the tax they have suffered up front.

Here's a link to the HMRC page: https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor/pay-tax-and-claim-back-deductions

Hope that helps.

Best answer
8 years ago

Thats brilliant thank you for your help.

Carly

8 years ago

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