Casual labour / subcontracting

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It is not widely known that you must establish someone’s status when you pay them any money for helping you with their labour.The trick or tip is to get them to supply their unique tax reference number. They should invoice you for their services . If they don’t offer an invoice, it’s best to issue a self billing invoice for them to sign at the time you hand over the money.
Lots of people will offer their services to you if you have work which needs doing. In some industries it’s well regulated such as within the Construction Industry Scheme (CIS).
Most labour suppliers will be registered as self employed or a partnership and frequently these days as a limited company.
Each of them will have its own unique tax reference number (UTR).
They are not obliged to put this on their invoice to you.
You must request it if you fall into the classification termed by the government as a contractor or subcontractor.
There is a useful helpline for Construction Industry Scheme if you are not sure about your position and always try to get professional tax advice from companies like Taxfile in South London where their tax accountants make sure to sort out all your tax affairs.
If for example you are doing up a buy to let then you do not necessarily have to register just for this one activity, just make sure you follow the invoicing guidelines as above.
It may seem a lot to ask of the person doing the work for you but these days you just can’t be sure of how the government will react if they discover you have paid someone without adequate proof that they are registered to pay tax on their own profits.
For more information on the new CIS you can refer back to our blog post dated 25th August 2007 entitled ”What is the Construction Industry Scheme?”

Your personal tax allowance

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Everyone who lives in the UK is entitled to a personal allowance. This is the amount of income you can receive each year without having to pay tax on it. Depending on your circumstances, you may also be able to claim certain other allowances.
There are three levels of personal allowance for 2007/2008 tax year:
•Basic rate, which is 5225 (with no income limit)
•age 65 to 74, which is 7550 (with an income limit of 20900)
•age 75 and over 7690 ( with an income limit of 20900).
It is important to bear in mind that if your income is over the income limit, the age related allowance reduces by half of the amount (£1 for every £2) you have over that limit, until the basic rate allowance is reached (you’ll always get the basic allowance, whatever the level of your income).
If you become 65 or 75 during the year to 5 April 2008, you are entitled to the allowance for that age group.

So if, for example, you are 69 and have an income of £22,000( £1100 over the limit) your age-related allowance would reduce by £550 to £7,000.

If HM Revenue & Customs (HMRC) knows your age you should get the personal allowance automatically. But bear in mind they won’t know your age unless you’ve told them or shown your date of birth on a tax return or claim form. If you haven’t done this already and you are 65 or over you need to contact your Tax Office.
If you want to claim a tax refund because you didn’t use your personal allowance (or for any other reason), you need to do so within five years from the 31 January following the end of the tax year concerned. Taxfile in South London can help you claim the overpaid tax . Their tax advisers deal with the Inland Revenue on your behalf , taking the strain off you at a taxing time, making sure that you never pay more than your minimum tax liability, whether this be income tax, capital gains tax (CGT) or inheritance tax(IHT).

What is the Construction Industry Scheme?

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The Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be handled by contractors.

A contractor is a business or other concern that pays subcontractors for construction work. A subcontractor on the other hand is a business that carries out construction work for a contractor.
Under the Scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s tax status as determined by HM Revenue & Customs (HMRC). This may require the contractors to make a deduction, which they then pay to HMRC.

As of 6 April 2007 the new Construction Industry Scheme replaced the previous scheme. The main changes in the scheme are the following:

• There are no more CIS cards, certificates or vouchers.

• Contractors have the responsibility to ‘verify’ new subcontractors by contacting HMRC.
•Subcontractors are still paid either net or gross, depending on their own circumstances, but it is HMRC who tell the contractor during verification which treatment to use.
•There is a higher rate tax deduction of 30% if a subcontractor has not registered with HMRC.

• The standard rate of deduction for those registered with the Inland Revenue is 20% .
• There are no more CIS annual returns. Now contractors must make a return every month to HMRC, showing payments made to all subcontractors. Returns must be made using official forms. Photocopies are not acceptable.
• Contractors must declare on their return that none of the workers listed on the return are employees. This is called a Status declaration.
•Nil returns must be made when there are no payments in any month. These can be made over the telephone as well as over the Internet or on paper. If made by paper, this must be on an official form. Photocopies will not be accepted. There will be financial penalties for failure to submit a return (including nil returns).

For most of subcontractors, the new CIS is still a puzzle. For this reason, the tax accountants at Taxfile in South London can unveil the mystery behind it. You can pop in to see one of our tax advisers in our office in South London, just two minutes away from Tulse Hill station or you can visit us on www.taxfile.co.uk.

Hi, let me introduce myself! I’m Taxfile and this is what I do:

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• I deal with the Inland Revenue on your behalf taking the strain off you at a taxing time!

• I have over 10 years experience in helping individuals as well as businesses prepare their tax returns and accounts for the tax office.

• I can help you register as self-employed, guide you with your property lettings, set up a limited company or sort out your National Insurance.

• Also, I can assess your eligibility for tax credits ( Pension, Child,Working)or help you register as an employer. You might also need help with your payroll and your book-keeping.• If you need to register for VAT or you have a tax enquiry, I am here for your assistance.

So whether you’re a cab driver or a bricklayer, a painter or a landlord, I can help you with your tax return. I pride myself on providing a personal service at very reasonable rates. Visit www.taxfile.co.uk and judge for yourself!

Tax problem? You name it, I solve it!