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sub contracting and paying other self-employed staff/contractors?

Posted by Christopher Ray on July 21, 2012 at 12:43am in Business

I have worked with a friend on some bigger jobs, sometimes its his clients he shares with me, sometimes I share mine.  Its worked out as we split the money half way, after fuel and tooling costs etc.  Though I don't know if this is the correct way for doing it, we both have our books separate. 

Can I set him up as a sub contractor and vice versa?  I don't want to pay more tax than I owe, when he'll have to pay it again, seems stupid. As I pay it myself and I believe he's up to date with his too. Though I don't want to seem to be avoiding anything with the hmrc but someone has suggested I need to look it up pronto, just in case I'm not doing it right.

Any help or advice appreciated!!!

Chris

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Tags: employees, contracting, jobs, sub, work
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Replies

  • Dan Frazer Gardening July 21, 2012 at 9:15am

    The subcontractor's fees come out of the top-line and the main contractor is taxed on the remainder/net after that is paid. The subcontractor will pay tax based on his fee. Overall this means no extra tax is paid doing it this way.

  • Christopher Ray July 23, 2012 at 11:19pm

    Thanks for your reply Dan.  

    Do I invoice the subcontractor as I would usually invoice a client?

    Dan Frazer Gardening said:

    The subcontractor's fees come out of the top-line and the main contractor is taxed on the remainder/net after that is paid. The subcontractor will pay tax based on his fee. Overall this means no extra tax is paid doing it this way.

  • Dan Frazer Gardening July 24, 2012 at 7:02am

    He invoices you! You invoice the client the full amount and pay him as an expense once you get his invoice.

  • Melissa Morton July 24, 2012 at 2:28pm

    HI Chris

    Thanks for raising this query.  I've just been going through this for the first time and a fellow designer told me the same thing as Dan.  Useful to see it backed up here.

    Melissa

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