This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.


Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Sole trader paying another sole trader

Joined:Wed Jan 27, 2021 12:05 am
Sole trader paying another sole trader

Postby Frankautumn » Wed Jan 27, 2021 12:19 am

Hi, this is my first post on here so hopefully someone can help me.
I run a landscaping business with 99% of my working being on residential properties.
I have pulled in other self employed landscapers from time to time to help when I need them so it maybe for a day or up to 2-3 weeks. Recently I brought a guy in who has a property maintenance company to carry out some clearing and fencing work whilst I were on another site. Over say 8 weeks he worked around 2-3 weeks a few data here and there for me in between his own projects. When it came to invoicing me his invoices were very basic and I asked for his UTR number just to verify he was a sole trader trading as his company name. It’s now been several weeks and still no UTR number. Am I right I thinking that if I were to be investigated and his invoice comes back as a fake invoice am I therefor liable for the tax?
I have held back a small amount of approx 25% until I have his UTR number.
Firstly am I right in doing this? Secondly should I have deducted his tax before paying him?

Joined:Wed Aug 06, 2008 4:01 pm

Re: Sole trader paying another sole trader

Postby robbob » Wed Jan 27, 2021 9:45 am

Am I right I thinking that if I were to be investigated and his invoice comes back as a fake invoice am I therefor liable for the tax?
It's all or nothing here if the work ever comes within cis you need the full monty cis reporting - penalties can be something akin to a death sentance for small business due to the discmintory way hmrc do calculations potentially fining you multiple times for the same offence - unfotunately if you didn;t realise cis applied your more likely to find out 12 months later as one month later - hmrc should have a non penalty related naughty step for minor offenders IMHO.

Anyway if its not cis UTR isn't a biggie but its very good practice doing what you do - note UTR could easily be fake so more important is proof that person exists - proper invoice with local home address and paid via bank transfer should do teh job - if anyone loks dodgy print off any of their web related buisness advertising pages.

Note if it is cis you must verify before payments and this is your best tool over non compliance - ie let every subcontractor know before they agree to job - get then to sign cofnrimation that they will provide info and they wont be paid till you receive info - warn them tax deducted all approrpiate rate as indicated by hmrc not them - furthermore i would specifically warn them on that sheet that if they have not specificlaly called and registered as subcontractors via the subcontractor helpline then tax dedcution rate may be 30% even if they have fully registered as sole trader with hmrc (additional registration needed for cis )

Ok so you should either not have paid the subby anything or paid them in full.
(1) If non cis make clear what info you wnat before commencing - i would minimum sale sinvoice with full name and home address and paid bank transfer - utr isnt mandatory but you will be less likely to get dragged into spats between non compliant bods and hmrc - note even if an engagement is not cis hmrc may not know that immediately so tehy may think it is and start asking you questions.
(2)lets look at cis
Here is the link to the cis god bible that should be your trust friend - any doubts get confirmation from subcontractor helpline - date time and helper full name - warning NEVER rely on cis helpline staff use them to backup formal advise in writing only!
Note many will tell you cis does not apply with regard to residential work and they are all telling porkies - residential work is only ignored from teh point of view of homeowners and others not in buseness eg btl property owners who are generally deemed not to be in business

Ok lets look at landscaping

FA04/S74 (2)(f) says that ‘operations which form an integral part of, or are preparatory to, or are for rendering complete (other construction operations including … landscaping’ are within the scope of the Construction Industry Scheme.
Within CIS
landscaping a housing estate, an industrial estate or the surrounds of a house as a finishing operation in a wider project of construction

Excluded from CIS
routine landscaping, gardening, forestry and tree surgery not undertaken in the course of a wider project of construction

Ok this is the dangerous borderline kind of situation where the supply could easily flip between cis or non cis depending on other fcators - this is often the case with cis and you only need one element inside cis to potentially bring the whole supply withi cis

The good news is potentially the work defaults to not bieng cis unless the work is part of a wider project on construction if my reading of the above is correct.

Unfortunately once you get into the more technical borderline areas if you ring the subcontractors helpline 4 times- they might say not cis 3 times and cis one time and they may only be correct 1 time out of 4!
If you want concrete proof write to hmrc and even then they will probably not answer you questions and simply print the baove links that you may have quoted to them :)

If work does come within cis then you should register as contractor and get all the paperwork up and running the minute you know you will be engaging A subcontractor - relevant reference take time to get issued and then you need codes to access online services so time is not your friend the fisrb time you engage a subcontractor - the only good news is its always based on "payments made" note tax month starst the 6th of each month - so if you have verified by phone and are awaiting pincodes in the post t o file online - try not to pay tem until after 5th month if you want to maximise time before monthly filing is needed (19th of next month is date you need to file return) -ie pay 5th month or earlier file return 19th of that month - pay 6th of month or later file 19th off following month.

Return to “Business Tax”