Subcontractor Tax

[cdsliftservices]

This Tax year I registered as Self Employed as a Subcontractor within the Construction Industry and am currently liable for 20% deductions for HMRC. My work has picked up so much that I have had to sub a proporation of one contract to another subcontractor whilst I complete works on a nother project. My confusion is that the Main Contractor will obviously pay me, less deductions and then I will have to pay my subcontractor less deductions..is this correct??

Say my proportion for the contract is 18k, and I sublet it to another Subbie for 15k (taxable), (therefore I still make a little money). My Main Contractor will Tax my 18k at 20% reducing my receivable amount to £14400.00 after tax, being less then the amount I need to Pay my Subcontractor...Surely that cannot be correct can it...My subcontractor is also registered as tax deductable so I would have to stop 20% tax on his £15k too...surely this would mean that the HMRC will be receivng two lots of tax on the same earnings...

Im a little confused and new to all this. What is the usual practice in circumstances like this.

[Tax Champion]

Firstly the 20% tax that is being deducted from your Contractor will be deducted from your tax liability for the year when your tax return is completed and your liability is calculated. (in your example £18k @ 20% = £3,600)

As for the work your subcontractor is doing. I am assuming that you are registered with HM Revenue and Customs as a Contractor. I know you are registered as a Subcontractor but if you have subcontractors working for you then you should also be registered as a Contractor. You then deduct tax at the relevant rate for that subcontractor and pay it across to HM Revenue and Customs each month. (In your example £15k@20% = £3k). That tax is then deducted from the subcontractors tax liability for the year. You must however verify your subcontractor with HM Revenue and Customs who will tell you what rate of tax should be deducted.

Hope this helps.