Self Employed Tax
 

I am a sole trader. I was recently sub-contracted to carry out some work for a local company. Work completed, invoice made, and today I received payment.

My invoice was made up of labour and materials. Off the labour charge the company i was working for have deducted 20% tax. I pay my own tax at the end of each year.

I dont pretent to know everything about business but I have been doing this for 4 years now and I have never seen this done before.

Anyone know what the crack is?

Just give your tax office a ring - they can be quite helpful.

sl

Ha, every time I try to phone them I have been on hold for an hour only to get cut off.

It's a CIS deduction (presumably you are in construction). Most of my tax is paid in this way, as I do a lot of sub-contracting.

Yes mate, so it is normal then? I assume you just show that the tax has already been paid on your tax return?

thats right mate, just keep the remittance slip you recieved from the company as proof that you have paid tax and put it into your books.

Ace, thanks all.

Yeah, it's just the way things are done. You should probably be registered as a CIS subcontractor already and have details to be able to give to contractors.

Plenty of info here - http://www.hmrc.gov.uk/cis/intro/con-or-sub.htm#2

Just register and you'll be sorted for subcontracting in the future. Obviously the rest of the time things are just done as normal. It's actually quite a good thing when the majority of your tax is paid like this, as it means you don't have to set much aside for the end of the year etc.

So, how does it work if you're charging a mark-up on the materials? Presumably in that case you just put aside some money to cover the tax on the mark-up - right?

Yeah I guess. I do all my returns online, much easier. Basically you pay tax on all profits.