Under the scheme there are no Cards, Tax Certificates or Vouchers.
Subcontractors must provide the Contractor with their Date of Birth, Unique Taxpayer Reference and National Insurance Number.
All Subcontractors should be issued with their Unique Tax Reference by the H M Revenue & Customs.
New Subcontractors need to register with the H M Revenue & Customs either by phone, internet or in person. If they are are unknown to the H M Revenue & Customs then they will have to go to a revenue office for an identity check. They will need to take two forms of ID with them. Each month the Contractor will hand to his Subcontractor a statement showing the amounts paid to him for that month together with a note of any tax deducted. The Subcontractor must keep this statement, as it his record of tax paid on his behalf, and pass this on to his Accountant in order for him to prepare his own Accounts.
The first matter a Contractor must address is to determine whether the Subcontractor is actually a Subcontractor or an Employee. This is a gray area, as there is not one factor that determines whether a person should be treated as employed or as self employed, as there are many that need to be considered. The H M Revenue & Customs may lead you to belive that, if a Subcontractor works for only one Contractor or he does not supply his own van or materials, he then must be an employee and cannot be self employed. Do not be fooled by what you hear from the H M Revenue & Customs because if they had their way we ALL would be employed. YOU MUST SEEK ADVICE ON THIS ISSUE.
The Contractor must verify the Subcontractor with H M Revenue & Customs. They will be given a verification Number and be informed at what rate any deduction should be made. There are three rates of deduction, Zero, 20% & 30%.
Each month the Contractor is required to complete and submit a Return to H M Revenue & Customs within 14 days, giving details of all payments made to subcontractors in that month. This deadline is very important as any monthly returns submitted late will incur an immediate penalty of £100 and rising until the return is filed. These penalties are for any Contractor and it applies even when there have been no payments made to Subcontractors for the month.
Also when submitting the returns the Contractor must provide the Subcontractor with a statement showing the tax deducted on his behalf for that month.
The Contractor does not submit annual returns as the monthly returns will contain all the relevant information.
All subcontrcators that are registered for VAT are subject to the reverse VAT charge scheme for any work completed for a main contractor. If you are unsure of the requirements you must seek advice from your Accountant.
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