Are you considering taking on subcontractors to build your construction business? Are you in the stage where you are ready to scale your business and considering hiring subcontractors?
Taking on board subcontractors can be daunting, especially for the first time.
In this video, we will run through what you need to know to stay legal and compliant so you don’t encounter problems later.
Register as subcontractor
If you are considering hiring subcontractors, you must register as a contractor first. This is an easy process that can be done by your internal finance department or by your accountant.
Also, before you start paying your subcontractors, make sure that you are verifying them prior, so the correct amount of tax can be deducted.
Get the tax right
As a contractor, you must ensure that you deduct the correct tax percentage from your subcontractors.
You need to verify your new subcontractors if they are registered with HMRC as subcontractors. If you can’t find them in the database, this can be because you were given the wrong tax number or they are not registered.
If the person is not registered as a subcontractor, you need to deduct 30% from their pay, while from a registered subcontractor, you deduct 20%.
This is very important as you can face serious problems if you deduct the wrong amount of thax.
Monthly CIS Returns
So now, you hired subcontractors in your business, which means you need to submit monthly CIS Returns. Keep in mind if you don’t submit your returns in time, you will end up with penalties.
When you’re paying your subcontractors, you have to issue them vouchers showing how much you’ve deducted from them, which will be 20% of their labour if they are verified; then, you will deduct this money and pay it over to HMRC. Also, if you have a CIS deduction from your income, you can offset this, but the best is to talk about this with your accountant.
In summary, you have to deduct 20% of your verified subcontractor’s labour. Be careful that all these amounts are genuine; false claims can cause big problems later.
The benefits of hiring subcontractors
The most significant benefit of hiring subcontractors is it allows you to scale your business quicker. It is easier to hire a subcontractor, you can be clear about the project, and everyone knows their job.
This will allow you to build relationships and reach out for different services when needed.
Also, when running a construction company, you will have customers asking for services outside of your skill set. But if you’ve got other people in the trade who can do the job, you can hire them and keep your clients happy.
As a construction business, there’s nothing better than happy customers because they will talk to everyone else about your services and become your indirect sales force.
Have you got any subcontractors at the moment? If so, are you keeping all the necessary records up to date?
Are you meeting all the criteria and paying the correct tax to HMRC?
If not, and you’re not sure about a certain area, feel free to jump on a discovery call with me. Click my Calendly Link below; I promise to give you as much value on the meeting as possible without any pushy sales pitch.
