how do you process sub contractor's invoices?

Question

someone please help me. I started working on a hire company on the accounts payable, I am taking someone's maternity leave and she used to do sub contractos as well as purchase ledger, my manager is making the subcontract and all I do is supplier invoice input, but as an accountancy student I want to learn as many things as I can. I have been reading about subcontractors and I know some companies get paid gross, other 20% and the non-registered one 30%, I have been asking her questions and I find out the subcontractors are made on a spreadsheet, you only type in the name of the company and the percentage comes on screen. I am a bit confused thou, could someone tell me on easy steps how to process sub contractors invoice??maybe if I have a better idea then she will let me do it ;) thanks very much

Answer 1

What you describe is just a feature of your company's software. The general procedure for subcontractors should be like this.

When a new sucontractor is taken on he should supply you with his national insurance number and UTR (a ten digit tax reference).

You then contact the Revenue who tell you at what rate to deduct tax. You also get a verification code to prove the conversation took place. This rate is then used for all subsequent payments to that subcontractor until HMRC tell you otherwise.

Your spreadsheet has been written to record the appropriate rate of deduction to avoid mistakes.

Have a look around the HMRC website www.hmrc.gov.uk and look for New CIS under contractors to find out more.

Answer 2

do you mean the CIS (Contruction Industry Scheme)?

each subcontractor has to apply for a subcontractors certificate / card etc.. and there are diff types depending on turnover. a form is filed out and a means test based on turnover for the last few years to determine whether the subbie can be paid gross or net of tax.

normally a self employed subbie will be paid net of tax, therefore you would get a timesheet off them or an invoice off them and use that invoice to fill out a CIS25 voucher (may have changed recently) with the gross amount and tax deducted at 18% i think now.

if they provide materials then you need to deduct the costs of the materials from the gross and then work out the tax on the net of gross less costs.

if paying gross to a subbie which can include a ltd company, then there is a diff CIS voucher where you just put the gross amount on and they are responsible for paying the tax over when their accounts are done.

go to www.hmrc.gov.uk and visit the CIS pages, there is a whole load of info on there.