Problem with payment and CIS

[Von Vardo]

Hi all, I’m after some advice on a situation I’ve got regarding CIS payments.

I’ve been doing the electrical side of PV installs for about a year, acting as a subbie to a guy who is MCS registered but not an electrician.

I’ve sent him 12 invoices since July last year. Out of those he has paid 8 in full but deducted an amount from 4 invoices. The amounts deducted from each invoice vary from 15% - 25%. I haven’t had any statement from him showing the deductions or proving that he’s paid the money over to HMRC – in fact I know he hasn’t because he’s only recently asked for my CIS number.

The current situation is that he’s overpaid an invoice by £500 and is asking me to return the overpayment. He’s also asked me to return 20% of each invoice that he paid in full so that he can pay the tax to HMRC. The £500 is less than the value of the deductions he’s actually made from my invoices.

I’m not too sure where I stand from a legal point of view – do you think I have to return the money that he should have deducted?

Thanks,

Ed

 

[telectrix]

it's his responsibility to pay your tax under CIS. add up the deductions he has made in total and they should not be more than around 20% ( not sure of exact figure). if it's more than the £500, tell him to9 get stuffed.

 

[Octopus]

Sounds like the other chap doesn't understand how it works either.

As Tel says its 20%, so an easy calculation to make one thinks

 

[telectrix]

remember that the deductions are for tax only. not |NI. buy the basic self-employed stamp ( about £2.50/week) or when you reach 65, or 70, whatever, the sharks will knock a bit off your beer and smoke money. ( state pension). just like they have done with me. if i pay them £12000, i'll get an extra 2 packets of smokes and a pint off them.

 

[Des 56]

He has the responsibility to pay to Hmrc, tax deduted for all sub contract payments

Dont quote me on the higher figure,but he should make enquiry to the revenue whether he is to deduct 25% or 20%,each person has a unique tax reference number UTR and they will base the amount on this info
For non revenue registered contractors,its the higher figure,for others its 20%

He has no decision or choice to make in this matter
The deductions are done at the end of each month. so individual invoices will not reflect the figure on their own
When he has made payment,he should give you a statement showing the earnings it is based on and the tax deducted

If he doesn't follow the procedure or is late,he is in "heap bigum shat"
You on the other hand will not have the responsibility for his shortcommings in this matter

 

[Von Vardo]

Thanks for the replies chaps.

As I understand it the rate of deduction should be 20% unless the subcontractor can't be verified through CIS in which case the deduction should be 30%.

He hasn't followed the procedure and is presumably trying to avoid penalties by asking me to refund the amount he should have deducted. My issue is that he hasn't given me any form of statement of payment and deductions so as far as I'm aware the money hasn't been paid over to HMRC.

To summarise:

He has overpaid into my account £500 (added on to an invoice - presumably an administrative error)
He has deducted a total of £602 from 4 separate invoices
He has paid 8 invoices in full - there is no pattern to which invoices have deductions and which were paid in full.
I have an invoice outstanding with him for £235

Shall I just tell him that, as he hasn't provided me with a statement from the HMRC, I'm counting the £602 and £235 as outstanding. Then I could factor in the £500 overpayment and I'm left with him owing me £337?

 

[telectrix]

untill you get some proof that tax has been paid to hmrc by him, then hang on to what you've got. add all your invoices. then you owe him 20% of the invoice amount. take away what he has already deducted, and that's the difference, one way or another.

 

[Von Vardo]

That makes sense, thanks!

 

[Deleted member 26818]

You are correct in your understanding that it is 20% for a verified subcontractor and 30% for a non-verified subcontractor.
Your contractor should have verified you at the outset, and then made deductions for each invoice.
They should have also filled out and submitted a CIS300 form each month detailing how much was paid, and the deductions made for each subcontractor paid.
If the CIS300 is not submitted on time, there is a late filing penalty of £100, for each month the filing is late.
As such a CIS300 form for January last year, filed today would have penalties amounting to £1100.
Unless the contractor has come to some arrangement with HMRC to waive the penalties, they would be off their trolley to attempt to submitt backdated CIS300 forms.
It sounds as if the contractor themselves have only recently registered for CIS as a contractor, I would suggest that they only submit CIS300 forms from that date, rather than attempting to backdate.
The statement of deductions the contractor has to give to you, is not one supplied by HMRC, just something the contractor is required to produce themselves.
Any deductions made by the contractor are paid to another department of HMRC (the same department that deals with PAYE and NIC), the deductions are usually paid quarterly or annually.
I would before doing anything, contact the contractor and discuss the matter face to face.
It may be that they have already informed the CIS that they have been employing you for some time, and the CIS have demanded backdated CIS300 forms etc.

 

[Von Vardo]

Thanks for that Spin, I'm going to arrange to meet him tomorrow and see what comes of it.

 

[Rockingit]

Before you discuss anything about CIS, I suggest you actually check on the HMRC website that the work you've been doing is actually CIS'able. The reason is that there are lots of exceptions to what is covered and that includes work to the EXTERNAL of the property, and also whether a project is a modification or a new build etc etc. Too much to go into here, you need to take a look for yourself.

 

[ste mac]

Bear in mind that the 20% is only deducted from the labour aspect of your invoice and not from any materials that you may have invoiced him for.