Tax Deduction Certificates

[Arrods]

My company has been billed for some work another company has done for us. Of the labour charge element, they've deducted 20% from the total bill. They're now asking us to supply a tax deduction certificate. Anyone know what this is all about and what we have to do? Many thanks.

[wolf63]

Could it be VAT related?

[Arrods]

Thanks wolf63, but don't think so. They've added 20% VAT to the whole bill. Within the bill there's a charge for labour of £x from which they've deducted a figure of 20%. Mystery to me.

[jno]

don't know. But if you charge £100 and add on 20% you get £120. But if you then take off 20% you get... £96. So you could lose a few bob there.

[Ouzel]

It could relate to this :-

http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=039zI-xtZZw

[Arrods]

Many thanks Ouzel - I'll give them a call.

[buildersmate]

You don't say what type of work was done by your company, but my immediate thought on reading it was that this is something to do with CIS,the construction industry scheme run by HMRC. It stops people working in the construction industry avoiding paying tax as it is deducted at source, I.e. the payment by the main contractor.
The link supplied to you by ouzel is the one for CIS. There is a lot of info on that website about when it applies and to whom, plus how to register. What I know far less about is what happens when a supply of unrelated services supplies something to a construction company. One assumes it does not apply. Say a supplier of paper to a major housebuilder for its copiers. That would be stupid.
However if you are a company working in the construction industry, I am really surprised that you have never come across CIS before.

[Arrods]

Thanks buildersmate (and others). Sorry I appear to have confused everyone. Our company carries out (non-building) surveys and we simply asked and paid a builder to make some alterations to our office - hence our ignorance in such matters.

[Arrods]

Problem solved! Spoke to the HMRC people who told me the work done doesn't come under the CIS scheme and we should simply tell them! Thanks again Ouzel.