Employing a sub-contractor

[sherrardk]

We are considering employing a sub-contractor (or whatever they should be called) as my husband is getting too busy to do everything (he sells and installs wood burning stoves). As this person is already trading as a builder, can we just pay him for the days he works for us and then let him sort out his own tax, etc? If so, does he need to sign something to this effect or would it be best (even if it would be a pain as the days worked would not be the same every week) to sort out the tax, etc ourselves (and pay him less to take account of this)? Thanks.

[boxtops]

IMO - you would only have to pay his tax etc if he was an employee of the company. If you are subbing work, he needs to give you a quote for the work he's going to do, then you pay him on invoice. It's then up to him to account for his tax and NI.

Interested to hear what others suggest as I may be a bit out of date.

[sherrardk]

That sounds like a good way to go about it. None of us want to get into any trouble but himself is already swamped, so is the girl in the showroom and I am doing what I can to help.

[EvianBaby]

It's not quite true that you only need to pay his tax if he is employed by you. Whenever we take on a new subcontractor we have to take their UTR (unique tax ref) and NI number, get it verified by HMRC and then deduct 20% (unless otherwise told) from their gross amount. We have to pay this to HMRC on the subbies behalf.

[boxtops]

I understand what you are saying, evian - but we employ independent trainers in my line of work. Our Payroll dept check their self-employed status and if they are recorded as such by HMRC, then we pay them in full for the amount on their invoice, and they make their own self-employed returns to HMRC re tax and NI. No involvement for us at all, as long as that arrangement applies. If HMRC say they are NOT registered as self-employed, then yes, we have to deduct NI and BR tax from the payment.

[The Builder]

Can of worms here, Mrs Sherrard.
If your husband has a business in the building trade, and takes someone on, then that someone is a subbie.
If it's only occasional, then the CIS (Construction Industry Scheme) operates. He pays the guy less 20% (not sure of the current figure). They exchange official vouchers, and, eventually, you send the money to HMRC.

If it begins to look something like full-time, then HMRC would consider the guy to be an employee. Then it would be PAYE, NI, Holiday pay, Sick pay etc etc.

[buildersmate]

HMRC has the CIS scheme in place to minimise the widespread opportunity for abuse by many working in the building trades to use subbies and avoid NI and PAYE obligations. Few other industries work this way.
Your hubbie needs to establish with HMRC whether they regard this as an arrangement where the CIS scheme must operate - if not you can do as Boxtops suggests - he would be a simple self-employed contractor (provided he does work for others as well)

[BillyBB]

Even if the CIS does not apply the subbie needs to do a fair percentage of work for other people too. If his main income is from you then HMRC can come and demand all the National Insurance (both employers and employees) and income tax that you would have paid if they were PAYE.
HMRC can backdate this for years to an eyewatering sum. And they want it now or could bankrupt you.

[BRIGHT SPARK]

As above......we employ several subbies.If the scope of work falls within the construction industry scheme you must call the tax office and obtain a UTR for each subbie.You will be advised as to whether they are on deduction or gross payment.Failure to do so could result in a fine for you and the subbie.Any tax you deduct up to the 5th must be paid to the revenue before the 19th.Once regestered you must make a return each month even if its a nil return or...yes youve guessed it .......you get a fine