Be aware of your obligations when using subcontractors

A subcontractor is usually defined as a business or a person that does work for a larger company as part of a building project.

They carry out work that the contractor can’t perform, but remains responsible for, while the subcontractor provides his or her services under a contract for service.

If you work for a contractor, you must be on top of your obligations under the Government’s Construction Industry Scheme (CIS).

The contractor is responsible for deducting money from the subbie’s pay and making the necessary payments to the taxman.

What does being a subcontractor mean?

You must register as a subcontractor for the CIS if you conduct work for a contractor and are either a sole trader, own a limited company, or are a partner in a partnership or trust.

Conversely, if you are classed as an employee, you do not need to register for the CIS.

Where you can register

If you are a sole trader, you can register online using the Government Gateway, or you can register using an online form.

If you need to register, you should get prepared by gathering the following information:

  • Your National Insurance number
  • Your legal business name/trading name
  • The business’s unique taxpayer reference number (UTR)
  • The VAT registration number (if applicable)

What is gross payment status?

Gross payment status allows for you to be paid in full, without contractors deducting money under the CIS.

To be eligible for this, you should have paid National Insurance contributions on time previously and you must be able to prove that your business does construction work in the UK. The business’s finances should also be run through a bank account.

Additional requirements are that the business’s annual turnover is at least £30,000, if you are a sole trader.

For partnerships and companies, turnover should be at least £100,000 as a whole, or £30,000 for each partner/director.

However, this does not mean that you are exempt from paying tax. When you complete either your Self Assessment tax return (if you are a sole trader or partner) or your Corporation Tax return (if you own a limited company), these payments must be declared as income.

If you need help or advice on CIS matters, please contact our expert team today.

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