How usual is it for Sub-contractors to take payments from the client then pay it to the Contractor?Got my first Sub-contractor and theres a lot of transactions that would inflate the income. I thought these were going to be quite 'clear' accounts from the original conversation we had I've just put the payments to the Contractor as drawings.
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Janet
They keep making the system idiot proof but then make bigger and better idiots!
I expected the client payments to be dealt with by the Contractor.
I agree, but in my opinion the subbie now becomes the contractor and vice versa so any payments now made by your client (the subbie) to the contractor would now fall under CIS which would mean verifying them and deducting the correct amount of tax depending on their status before any payments could be made
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
I agree, but in my opinion the subbie now becomes the contractor and vice versa so any payments now made by your client (the subbie) to the contractor would now fall under CIS which would mean verifying them and deducting the correct amount of tax depending on their status before any payments could be made
Sorry Doug, don't think I've explained this properly.
Subbie sent to job, completes Contractor's job sheet/invoice at the rates set by them; client pays him the cash as the representative of the Contractor. He pays it into his account and transfers it to the Contractor's accounts. At the end of the month the subbie invoices Contractor for all of his time/parts used and they pay him, minus the tax due.
(Some clients ring the company up and pay by card - I like these people )
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Janet
They keep making the system idiot proof but then make bigger and better idiots!
I Janet
Few things jump out, probably not all but just off the top of my head for now
-Is it just cash payments? (MLR either way)
-If the rates are set by the contractor, he is sent to the workplace by the contractor and now accepting payment as the contractor's representative then he is an employee. IR35 screaming here!
-No he should not be accepting payment. At all (in my view). All sorts of complications, including inflating turnover. Contractual as well as if one or the other decides not to pay their bill, or dispute work blur blur blur.
- Audit/paper trail.
- What happens if the end client tells the contractor they have paid the subbie - and they havent!
- CIS - sounds like its needed (albeit issues as above need clarifying)
- Never ever believe a client when they say its easy/straightforward/clear or words of that nature. Usually the easy ones never make a remark, the difficult ones always embellish how straightforward it is.
If you have put the payments to the contractor to drawings, are you doing the same with the payments in from the end user?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I Janet Few things jump out, probably not all but just off the top of my head for now
-Is it just cash payments? (MLR either way) -If the rates are set by the contractor, he is sent to the workplace by the contractor and now accepting payment as the contractor's representative then he is an employee. IR35 screaming here! -No he should not be accepting payment. At all (in my view). All sorts of complications, including inflating turnover. Contractual as well as if one or the other decides not to pay their bill, or dispute work blur blur blur. - Audit/paper trail. - What happens if the end client tells the contractor they have paid the subbie - and they havent! - CIS - sounds like its needed (albeit issues as above need clarifying) - Never ever believe a client when they say its easy/straightforward/clear or words of that nature. Usually the easy ones never make a remark, the difficult ones always embellish how straightforward it is.
If you have put the payments to the contractor to drawings, are you doing the same with the payments in from the end user?
Thanks for the reply Joanne
From the paperwork I have it's only cash and I'm not sure how he would fair if they said they'd paid but hadn't. Didn't think about the MLR implication either!
I haven't done the income yet. I stopped working on them until I could get it straight in my head
I'll take all this on board and look in to it more so I'm fully prepared when I speak to him.
Think I need to become a bit more cynical
I'm off to find the gin...
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Janet
They keep making the system idiot proof but then make bigger and better idiots!
I would say it is not usual at all. I've never known this scenario and as Joanne says it opens a whole can of worms. if the cash is going into the subbies account and he is then paying the contractor then it has to come under CIS, the subbie becomes the contractor and vice versa.
I can possibly think of the odd subbie (the MD of a firm who does specialist works for my company for example and who we have had a working relationship with for years ) who may accept cash on our behalf from a client if the client wanted to pay cash (rare) but he would bring it straight round to our offices for us to pay into our company bank account.
Thanks for your reply. I'm seeing the client next week, hopefully, and will have a good chat with him about how things are being carried out, explain a few things to him. It's a big company he's working with so it all seems a odd that they're not sticking to the rules...I'm still very 'green round the gills'!!
I'll update you all once I've seen him.
Cheers
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Janet
They keep making the system idiot proof but then make bigger and better idiots!
I'd only just started working for my company (as medium sized construction firm) when I had to tell the financial department of an NHS trust we were subbing for that they had the new CIS completely wrong (it was just after the old card system became obsolete and they were insisting our MD visited their offices with his card that didn't exist any longer rather than receive the details needed for verification).
If its smells fishy - run a mile. Suspect dodgy - report it. Just because its a big company doesnt mean they do things right - there are a few HUGE companies that have been in the press for their dodgy doings.
If you havent been invovled in CIS - run! Or at the very least check out your PII covers you with your skillset. Its a complex area as the guys say.
Have to say, even though I dealt with a few, I tend to avoid nowadays, just because of the hassle that generally comes with them. My cant be ar*ed gene kicks in
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
If its smells fishy - run a mile. Suspect dodgy - report it. Just because its a big company doesnt mean they do things right - there are a few HUGE companies that have been in the press for their dodgy doings.
If you havent been invovled in CIS - run! Or at the very least check out your PII covers you with your skillset. Its a complex area as the guys say.
Have to say, even though I dealt with a few, I tend to avoid nowadays, just because of the hassle that generally comes with them. My cant be ar*ed gene kicks in
I'll get my running shoes Joanne
It's all complex...
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Janet
They keep making the system idiot proof but then make bigger and better idiots!
So why not just put the cash straight into the contractors account?
Update on this one...
He issupposed to pay it direct to the contractors account but didn't receive a payment book at the outset. He said it was easier for him to pay them out of his account as he can't always get to the bank to pay the money in, in the required timescale. Don't think the contractor chased him at first about how it was happening. Things been sorted now.
Thanks everyone for your help.
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Janet
They keep making the system idiot proof but then make bigger and better idiots!
I've just put the payments to the Contractor as drawings.
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