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When HM Revenue & Customs (HMRC) verify your subcontractor they’ll tell you how to pay them. This could be:

  • Gross – with no deductions taken off their payment
  • Net of a deduction at the standard rate – 20 per cent
  • Net of a deduction at the higher rate – 30 per cent

HMRC will tell you to pay a subcontractor gross if they’re registered with them to get gross payments.

If the subcontractor is not registered for gross payments, HMRC will tell you to make a deduction from their payment at the standard rate as long as they can verify them. If HMRC couldn’t match the details you gave for them, they will give you a special verification reference and tell you to make a deduction at the higher rate.

Making a Deduction

If HMRC tell you to make a deduction before you pay a subcontractor you’ll need to work out how much to deduct.

You can read more details about how to make deductions correctly in our guide to paying subcontractors under the Construction Industry Scheme (CIS).

Paying Deductions to HMRC

You must pay HMRC any deductions you make from your subcontractors’ payments.

Contact

Contact us below or Call 0333 012 4079

Contact

Contractors Tax Advantage is a leading accountancy practice providing accountancy services for contractors across the UK.