Subcontractor savings (1 Viewer)

Mitchells Scaffolding

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some of our sub-contractors have been asking for us to withhold money from their payments i'e 50 quid a week and hold it for when they have a short week or hols is this possible without causing problems for the company with the taxman???
 
There's a couple of ways to look at this.

1. Are they invoicing you for say £100 and you're only paying them £50?

2. Are they only invoicing you for the £50 and that's what you pay them?

I would have thought that if you got them to do things the second way, then you're in the clear. You'd only be paying them the same as your invoice. When they needed some of the money that you're holding back for them, get them to invoice you for the extra amount that week.

Not too sure about it exactly from a tax point of view but it would be easier for you to keep your books right and theirs.

If you did it as example 1, the taxman may say that if the subbie has earned it and invoiced it, he'd want his cut whether or not he has had all of the cash.
 
Hi Mitchells

I'll ask our guy that does all the small companies payroll type stuff if he can give you the answer you need.

Unfortunately, I won't be able to get hold of him until at least Monday, so bear with... as they say!
 
I do that for some lads and just bank it in personal account til they want it

Tax as normal tpay to them via bacs then get back as cash and bank it
 
Sorry it took so long to get back on this.

I've been advised to say


"He can withhold as much money as he likes so long as he has taxed them correctly.

If they earn £100, he takes off £20 tax and then gives them £40 and puts £40 away for them that’s fine from a tax point of view. Its a bit messy for him to administer but if he’s ok with it then go for it."


Hope that helps :)
 
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