Verifying subcontractor - The Book-keepers Forum (UK)

Lizzytish · Member

Verifying subcontractor

Cheshire · Master Book-keeper

Hi
The UTR for his Limited company cannot be used if that company no longer exists.

Is the subcontractor working as self employed or has he in fact set up another Limited company? This is the first thing to check.

I will assume he is a sole trader - Im guessing the reason you cannot use his sole trader UTR is because he has not registered himself as a contractor with HMRC. He must do this before you can attempt to verify him - once he has done this you can go through the verification process - dont forget to check him every couple of years too!

Lizzytish · Member

Hi Joanne,

Thank you so much for such a quick reply.

The subcontractor is definitely working as a sole trader.

So can I just clarify, he will need to register as a sole trader with HMRC for which they will give him a completely new UTR number and the one he had as a limited company is now obsolete?

If my understanding is correct until he has done this I will pay him without verification at 30%? That will certain focus his mind and make him get his finger out LOL

Cheshire · Master Book-keeper

Hi Marian
His personal /sole trader UTR will be one and the same. If he hasn't registered as being self employed he will need to do that within 3months of starting. In addition he will need to register as a CIS subbie with the HMRC CIS dept, see this link for how he does this

www.gov.uk/what-you-must-do-as-a-cis-subcontractor/how-to-register

Until you can verify him, yes deduct 30%, I find that does indeed focus minds!!

Lizzytish · Member

Crickey he won't be happy. If he needs to register for self assesment to get a new utr and then register for CIS isn't going to happen overnight so 30% deduction here we come

Cheshire · Master Book-keeper

Sorry but I thought you said he has a personal UTR? This will be the same UTR when he is a sole trader, but he needs to tell them he is now self employed (as opposed to a Director). He won't get another UTR.

Lizzytish · Member

Hi Joanne
Sorry but not sure if it's because it's late or what but not understanding this

Subcontractor done work in the past as limited company and verified but now folded that company.

Has now done work as a sole trader,, so the personal/sole trader UTR will be different to the one I verified him with when I verified as a limited company?

Cheshire · Master Book-keeper

Hi the limited company no longer exists so therefore neither does their UTR.

The guy should have a personal UTR (most people do, especially Directors).

The guy should have notified HMRC that he is now a self employed ie a sole trader, HMRC will link that sole trader record to his personal UTR

If he hasn't told them he is self employed that's what he needs to do first.

Then, or if he has done the above already, he needs to register as a Sub-contractor with the CIS helpline at HMRC.

Once he has registered with CIS you can verify him as a subbie and HMRC will tell you what percentage, if any, to deduct when paying him

--------------------------------

Completely disregard the company UTR...that has nothing to do with him anymore. (Previously he was an employee of the business...it's was a different legal entity to him!)

Hope that helps

-- Edited by Cheshire on Monday 9th of February 2015 11:08:05 PM

Lizzytish · Member

Hi Joanne,
Thanks for your very clear explanation. I explained everything to him this morning and he came back to me with a different UTR, tried to verify him online but still no luck so advised him to refer back to HMRC. He wasn't a happy bunny but as I wasn't able to verify him wasn't much I could do.

Could I also ask another question, as a contractor is it acceptable to ask the subcontractor for copies of invoices for material charges? Obviously I'm not naive and fully realise he may have inflated his costs but he assures me he hasn't.

Cheshire · Master Book-keeper

No problem.
So the other question...so to clarify, he has added some material costs on with his labour rate for completing the work involved? You could ask for copy invoices, but to be honest his charge out rate is his charge out rate, regardless of whether or not he has hiked the price, so he will most likely say no. If the contractor is worried about the costs of such items/being ripped off he should negotiate to provide all the parts that the subbie needs, then all you are getting is an invoice for the subbies labour.

Don't forget to adjust the invoice for any material costs befor you do the CIS has eduction when you get round to it.

Nimac · Senior Member

Hi

I hope you dont mind me hijacking this thread!!

I had a subbie who submitted an invoice and he was paid minus 20% however the person paying him did not realise about verification.

I have tried to verify him but cant therefore he should have had 30% deducted, not sure what my options are here, can anybody help?

Thanks.

Cheshire · Master Book-keeper

Hi Nigel
have you done the CIS return for the month concerned yet? If not - go and get the verification promptly (he may need to register as the one above does, first!).

Either way, without verification how does anyone know what percentage to take off - its not 20% as standard (albeit this is the more common rate, but there are some at 30% even when verified and some also at nil. You have until 19th!