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should i bill subbie labour to contractor client

for CIS purposes is subbie labour included with our labour charges to main contractor

A client engages subcontractors along side their own direct labour.  A new client is a property developer and registered with HMRC for CIS as a contractor.  My clients are not gross sub contractors and therefore will suffer deductions at 20%.  Is the subcontractor labour (which has already deducted 20% from and paid to HMRC) to be included in the Labour aspect of the bill to the main contractor from which 20% will be deducted and then claimed against PAYE/NIC/CIS? or is it just direct labour?

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13th Feb 2018 13:59

I don't understand the details of the question - what is the connection between "should I bill" and "a client", a "new client" and "my clients"?

Any employer must deduct PAYE from payments to its employees and pay over the PAYE to HMRC. Any contractor which engages sub-contractors, who are not verified as gross payment, must deduct CIS tax and pay it over to HMRC. Any sub-contractor, who is not registered for gross payment, must expect his contractor to deduct CIS tax from the gross amount, less VAT, CITB levy and the cost of materials and plant hire, shown on the invoice from the sub-contractor.

So, the (intermediate) sub-contractor's cost of labour, whether (directly) employed or sub-contracted, is subject to CIS tax when charged to the (main) contractor.

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By Kestrel
to Euan MacLennan
13th Feb 2018 14:29

Apologies too many clients and contractors! I do the admin work for a construction company who is both a contractor and a sub contractor. I have to raise an invoice to a client of the construction company who is a property developer for labour by my clients employees and by my clients sub contractors, and materials. Will it just be my clients employee's labour that suffers deduction or both the employee's labour and sub contractor's labour?

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13th Feb 2018 15:20

20% will be deducted from the total bill net of any materials costs.

The matter of the 20% you have deducted from your subbies is not relevant to you billing the contractor.

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to andy.partridge
13th Feb 2018 15:34

Absolutely correct.

You are permitted to deduct certain costs before calculating the CIS tax but payments to subsubcontractors (if I may be permitted to term them so) are not one of them.

If there's big bucks involved, the client may wish to consider incorporation to get his money back quicker.

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By Ruddles
to lionofludesch
13th Feb 2018 16:18

Just adding another issue to watch out for (because it caused one of our clients real problems) - if the subsubcontractors are registered for gross payment but the subcontractor net there may be a significant cashflow headache.

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to Ruddles
13th Feb 2018 16:37

What - you mean for a company ?

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By Ruddles
to lionofludesch
13th Feb 2018 16:41

Not specifically but yes it can affect companies.

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to Ruddles
13th Feb 2018 16:54

Not sure I agree with you for the unincorporated. They have to pay the CIS tax to HMRC shortly afterwards anyway. Yes, there's a small cash flow advantage, but not much.

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By Ruddles
to lionofludesch
13th Feb 2018 17:07

Looking only at the subsubcontractor element:

Subcontractor receives £10k less 20% = £8k. He has to pay £10k over to subsubcontractor, so he's £2k out of pocket.

If the subsubcontractor were net, then yes the subcontractor has to 'pay' £2k to HMRC - but this would simply be offset by the £2k deducted by main contractor.

Gross/gross - £10k in, £10k out

Net/net - £8k in, £8k out

Gross/net - £10k in, £10k out

Net/gross - £8k in, £10k out

One of those looks rather unattractive to me

But just ignore me - that is how it works for companies

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