Advice for CIS - Anyone?

[coolcatkelso]

Hi guys

Been a while since I last posted on here, but thought it may be the best place for an answer..

I have been awarded the local contract with the council, but on all projects, I am the main contractor.

The council WILL pay all CIS deductions before I get paid so I don't need to do it myself but.. I have heard from a few people that a main contractor should add a cut to a subcontractors invoice for myself.

I suppose if I am having to chase them to get on site etc or discuss plans and drawings, then I should make something for my time and calls etc,

So if I was to slap a 20% profit on for myself, lets say that they charge me £100 for labour, - CIS would be £80.00, but If I add my cut onto that, then it would be £120 to the council, - the cis =£96?

 

[^woody^]

So you haven't agreed any contract rates with the council, and can charge them whatever you like?

 

[coolcatkelso]

Hi

The only thing they have asked is what my profit margin percent is, Being a nice guy and not out to make a fortune, I only charge an extra 20% on everything for profit, but apart from that I can charge them what I like

 

[^woody^]

Great work of you can get it. Lol.

Anyway, try not to call this this a "cut" or "profit", but rather an "uplift"

This should reflect your costs and profit, but also your risk if things go wrong. The profit could easily become loss though. You would add your uplift to your subcontractors invoice and then invoice the council that. They will then deduct the CIS amount.

I can't understand your arrangement though. If the council has already asked you for your uplift rate, then how can you charge them what you like? If they ask for an invoice of your subcontractor or supplier, then it will be clear what you are charging as your uplift.

 

[JohnD]

call it "margin"

If you want to know your profit, you have to calculate all your operating costs, including employer's NI, insurance, depreciation of tools and vehicles, office expenses, training, insurance etc, and apportion them per working day (which might be about 250 in a year) and subtract them from the earnings

 

[terrypin]

I don't understand your charging structure.
Apart from the 20% where are you making your wages?
I would have thought you'd have to have something in writing, stating rates for each trade and labourers etc. rather than an open charging policy.

 

[coolcatkelso]

Hi

They have my hourly rate based on 2 men, plus an allowance of 20% profit (On slates only) other materials such as lead, skylights etc are at my own discretion, but the main question was regarding the CIS tax on my subcontractors, is it fair to add on 20 / 30% whatever on to their sum?

Invoices from subs are sent to me, I then include their price in my invoice, so the only person seeing their original price is me. BUT, the council pay the cis on everyone in my invoice, so how would this affect their cis payment as it would be calculated on my price not theirs?

Cheers guys

 

[^woody^]

You will need to deduct 20% or 30% from the payments you make to your subcontractors.

Don't forget that you need to separate labour and materials on your invoice to the council, as you are only taxed on the labour element.

So,
Your contractor invoices you £150 - that's £100 labour and £50 materials
> Subcontractor invoices you £150
You invoice the council this plus your uplift - £150 + 20% = £180
> You invoice the council £180
The council deducts 20% from the labour element (100-20 = 80) so pays you £80 for labour plus the £50 materials = £130 total
> The council pay you £130
You then pay your contractor minus 20% on his labour
This will be £100 - 20% (£20) = £80 plus the £50 materials = £130
> You pay your subcontractor £130

In this example you wont get any profit until the year end when you do your books!

So what you need to do is add your own labour element to the invoice, otherwise you wont be getting any money

ie the subcontractor's £150 + £20 your labour + 20% profit = £204 invoiced to council.

Try it with different figures, but that is the principle.

 

[coolcatkelso]

Thanks for that, makes a little sense but put into action and I'm confused again

My builder estimated work for me at £1,818.00 and half way through the job I sent the council an invoice for work to date etc
But in that invoice I charged them for the builder at £1818.00 + 30% margin for myself so invoiced at £2597.15

The council paid it but has paid the CIS due from myself and the builder straight to HMRC, so the council have paid out £519.43 on cis from the builder.

The builder has now sent me his final invoice

Subtotal (Labour & Materials) 797.20
Vat £159.44
Total £956.64

So how can I work that one out? Surely I can only 20% back from my builder and he will get a happy surprise in April when he gets more than 20% back?