Subcontracting advice needed!

Subcontracting advice needed!

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My husband has hired (and paid) a joiner to do a small cabinet alteration in a bathroom he's renovating, would this be classed as subcontracting, should he have gone down the CIS route? Or can he 'get away' with paying for these small jobs through the books without all the aggro? This has already happened, any advice what to do next? Looking through the Sage nominal codes I am guessing this would go down as 6001 Cost Of Sales Labour is this right?
Thanks
Karen Goldberg

Replies (7)

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By User deleted
17th Oct 2007 09:34

Simple answer - YES
Karen

The simple answer is yes this is a sub contract arrangement. Your husband has been engaged by his client to rennovate the bathroom. He is the contractor. In his position as contractor he has used services supplied by another trader, the subcontractor.

Your husband should have deducted the appropriate rate of tax 20% or 30% if subbie was not registered.

What to do next? Practical advice would be not to worry too much if this was a really small job but get it right in future!

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By Euan MacLennan
17th Oct 2007 10:53

Definitely Yes
Richard - you are wrong.

Both the bathroom renovation done by the husband and the cabinet alteration done by the joiner are construction operations. Householders are excluded from being contractors, so CIS does not apply to them, but as Stormrider says, the husband is a contractor and the joiner is a sub-contractor under the construction industry scheme. The husband should have subscribed to the full rigours of CIS - verification of sub-contractors, monthly returns even if nil, etc.

There is no de minimis. You might get away with it once, but do not make a habit of getting it wrong. The alternative is to get the householder to pay the joiner direct.

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By Paula Sparrow
17th Oct 2007 13:31

Get the customer to pay direct
Small builders can avoid having to apply the CIS rules to subcontractors if the customer pays the subcontractor direct. This does mean the builder can't add a mark up to the subcontractor's charges.

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By Waterways
17th Oct 2007 14:50

Thanks guys!(and girl!)!
Thanks for your answers, I thought this was the case, also one more question if I may be so cheeky as to slip another one in....
If he does need the odd person for a day or so which is the best way to do it, does this also have to go through the CIS route, or can he pay casual wages if so can he do it gross rather than net?
Hoping I'm not pushing my luck here.....

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By AnonymousUser
17th Oct 2007 15:24

Paying direct
Get the customer to pay the subbie direct.

However it is a reasonably common practice in this situation to agree with the subbie beforehand a 'commission' fee.

The subbie builds this into their invoice to the consumer, and then the contractor invoices the subbie accordingly.

'Casual' wages?! The official answer is you have to do it by the book which would mean CIS deductions. 'Casual' implies 'cash in hand' which implies tax evaision which we cannot condone! (Sorry to be blunt!)

I suggest the commission route - get the subbie to invoice customer direct, and agree that he pays your husband commission for getting him the job.

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By Waterways
17th Oct 2007 16:13

Casual wages
EEEEK tax evasion?!!!! No, I was wondering if I could use the same principles as the leisure industry with casual labour for the guys my hubbie is looking to employ 'now and again' when required. If I'm right we still hand over tax and national insurance, but it's supposedly easier for a newbie book keeper like myself to calculate.

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By AnonymousUser
17th Oct 2007 16:33

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Hi Karen, I don't know much about the leisure industry so I can't comment. And I know you want to get it right :)

Not sure if there are any relaxed rules for very casual/ temporary workers, but I was under the impression that the CIS rules just 'are as they are.'

Hopefully some other people can clarify for you.

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