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• # 109957
• Sun 16 Aug 2015 02:49 PM

I have a client (sole trader) who uses a subcontractor to help with larger jobs. On his invoices to the clients he has stated there will be 2 men on the job and what he is paying the subcontractor as well as himself. Is this sufficient to put through as expenses for the extra help or should I have proof that he has paid the subcontractor?

Thanks for any help

Gillian

•   Macclesfielod
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• # 109958
• Sun 16 Aug 2015 08:52 PM

Hi Gillian,

If your client is subcontracting work then he becomes the main contractor for that subcontractor and has to conform to CIS rules.

Client will have to be registered as main contractor with HMRC for CIS purposes.

All subcontractors that he uses must be 'verified' by HMRC before using them - this will determine the amount of tax to be deducted from their payment - whether they are gross status, 20% Tax or 30% Tax on labour costs.

This information has to be reported to HMRC and a Statement of Deductions given to the subcontractor from your client.

The subcontractor must give your client an invoice for the works carried detailing materials and labour.

However, as you don't state what business your client is in it may be that it is not subcontract work as defined for CIS.

If this is the case then your client should still get an invoice for works carried out before payment is made. Could be paying 'cash in hand' which is not acceptable!

Marilyn

• A clever person solves a problem.

  A wise person avoids it.

  Albert Enstein

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• # 109963
• Mon 17 Aug 2015 11:13 AM

Thanks, this client's work does not come under CIS rules so that is not an issue.

When I asked him for evidence of payment I got a sharp text back to say his previous accountant did not ask so many questions and could he pay for work so far and go back to his previous person. I replied it was up to him and he decided to carry on with me.

What I propose doing is to put all his sub-contracted work in a separate account in VT+ so I know what it is but is does not count against sales and to just allow the one piece of evidence of payment against his sales that he has given to me. When he gets the tax bill he may come up with the other pieces of evidence that I require.

I will also tell him that he must get an invoice for each piece of work carried out that he pays for.

Gillian

•   Macclesfielod
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• # 109995
• Thu 20 Aug 2015 06:54 PM

Hi Gillian

Whatever your client is billing, is what his turnover is.........if that invoice includes his subcontractors costs, then he needs to receive bills from his subcontactors, which he will put down as his Expenses / Cost of Sales. He cannot include income on his invoices that are not part of his business.

If he doesn't want his subcontractors income connected with his paperwork, then he needs to bill his clients with separate bills from him and his subcontractors.

I hope this helps you to 'suggest' a better way of working with him

• Carol Saunders
  Lady of Ledger Book Keeping
  Telford, Shropshire

  
  

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