Miscalculation or unfair? | AccountingWEB

Miscalculation or unfair?

I am working on the 2010/11 tax return for a subcontractor who works as a painter and decorator. He is paid net of 20% tax. On receiving his records I noticed a CIS payment and deduction statement with the following figures.

Gross amount paid (excl. VAT) £2492.00

Less cost of materials £171.00

Amount liable to deduction £2321.00

Amount deducted £464.00

Amount payable £1857.00

Is this just a miscalculation and should the Amount payable be £2028.00?

How can this be rectified if incorrect?


Thanks in advance.

Old Greying Accountant's picture

Are you sure it is wrong?    1 thanks

Old Greying Acc... | | Permalink

Often, to avoid employment legislation, the contractor will provide the materials for the subbie, if these materials were provided by the contractor then that may be why they are not added back.

Personally, I would prefer a cheque swap, just to keep a clear trail. None of my clients do this but it can be a legitimate transaction, as the contractor can then ensure the correct products are used. If he charges the subbie the amount actually used, not the amount on the job spec then risk passes to the subbie adding weight to the self-employment status should this be questioned.

If it is a miscalculation, the CIS forms will be correct, you just need to tell the subbie so he can chase up the contractor.

A fool or a knave?

alanhone | | Permalink

 It is well documented within my business that payments from main contractors / builders are often wrongly made, but never by early or over-payment. If there is a QS involved, their training seems to include all methods for "trying it on" in order to keep the cashflow positive for the client.

In this case the materials appear to have been deducted correctly before calculation of CIS deduction (if the figure is an agreed one), but they haven't apparently been added back for the payment, if they have not been paid separately (unusual).

This is possibly a failure of the system - but this is what construction accountants and QSs do, so how do they get it wrong inadvertently? One then must assume this is a deliberate ploy to keep hold of the cash for a while longer (forever, if not challenged)

Send a letter or email (something documented) to the contractor asking for the breakdown of the payment and the whereabouts of the materials payment and await the explanation.

I would not necessarily expect the CIS forms to be correct, any more than statements and balance sheets are. If they always were, there'd be no need for accountants and auditors (but that's another story)

It may have been a genuine error

kpdorset | | Permalink

It may have been a genuine error at the time of payment but they must have a balance in their creditors owing to the subbie if they entered the amounts correctly into their ledgers. Get the subbie to ring up and ask. If not, they need to explain their calculation.

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