CIS Contractor Helpline

CIS Contractor Helpline

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The problem relates to a subcontractor who has inflated the amount of materials to reduce the labour amount. Apparently his accountant told him to do this because he has to pay subcontractors himself and this will avoid having tax deducted twice.

Also, this is the second invoice like this and the contractor has already paid the first one based on the incorrect allocation of materials & labour.
Stuart Jones

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By JSJ54
31st Mar 2005 15:27

In desperation
I phoned my local call centre which I discovered has its own team of CIS advisors.

Their advice was to ignore first invoice & ask for proof of cost of materials.

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By Abacjm
31st Mar 2005 23:39

Confusion!
Stuart,
Unless the contractor is on a "time'n lime" basis, at the end of the day the contract will come out at the same price - (Agreed Contract Price.) What he is doing is trying to postpone a tax deduction on HIS labour income from the main contractor to help with immediate cash flow.
As he is deducting 18% from his own sub-contractors and paying it over to I/R, I dont see where HE suffers, apart from timing and cash-flow. Any tax deducted from his own income is tax already paid (in advance)that he doesnt have to find again on submission of his SA Return in Jan06 or earlier.

If cashflow is a problem now, what will it be like then, when he has to find it plus 50% again as POA for the following year.

No one but the client has the right to ask him to verify what he charges for either labour or materials, imho.

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