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self employed tax
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hello, could someone explain about the gross income that the IR use for calculating the 30K+ for full S/E status? they are asking for proof over the last 12 months,
this is to do with UTR at source whatever that is!!!
cheers
a bewildered Dotty
this is to do with UTR at source whatever that is!!!
cheers
a bewildered Dotty
Answers
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Oh hi, well he went to the tax office today to ask if he could change to full self employed status and be calculated or tax on his gross income annually instead of being taxed at source as he is now using the vouchers (it was SC60s). The tax office person gave him a number to ring which was defunct, so he went back and the person in the Tax office said he would need to prove his income was over 30K for the last 12 months. then the person asked what his gross was and he told her and then she said, but u take your materials and expenses off that. so he said yes, but then that would be my net not my gross, and she said yes but we need to know that too. therefore he is now confused!!!! he gave up and left without asking to see anyone else.
hi buildersmate
yeah he is a self employed joinery contractor and wants to change to full SE status and pay his tax annually on gross income. but what he wants to know is why the woman at the tax office needs his net figure. they have the 07/08 return anyway, but he can't understand what she meant when he had said his gross but then she said 'well you take your materials and expenses off that' which he knows, and when he said, so you want my net figure to count as my gross, she couldn;t give him a proper answer. and i don'y know what she meansd either, why do they want to know the net figure when he is trying to change to the full se status and earn the money gross without the deductions at source?
yeah he is a self employed joinery contractor and wants to change to full SE status and pay his tax annually on gross income. but what he wants to know is why the woman at the tax office needs his net figure. they have the 07/08 return anyway, but he can't understand what she meant when he had said his gross but then she said 'well you take your materials and expenses off that' which he knows, and when he said, so you want my net figure to count as my gross, she couldn;t give him a proper answer. and i don'y know what she meansd either, why do they want to know the net figure when he is trying to change to the full se status and earn the money gross without the deductions at source?
Nothing to do with your UTR, Dot, or "full" self-employment - you have to be self-employed for the Construction Industry Scheme to apply to you at all. You're talking about receiving gross payment under CIS instead of having money deducted by the contractor. One of the things you have to
show to get paid without deduction is that you earn over �30,000 a year, EXCLUDING money for materials. It's confusing, but that figure can be called either your net turnover or your gross profit. But it's only words; I think you'll know the figure. It isn't always on somebody's tax return; that's why they want you to tell 'em.
Quote from the revenue website:
Who can receive gross payments under CIS?
If you run a business that meets certain conditions, you can ask us to register you for gross payment. Your business must:
do construction work in the UK and be run largely through a bank account
have a construction turnover, excluding VAT and the cost of materials, of at least �30,000 each year (more for partnerships and most companies)
have complied with all its tax obligations
Before we can grant you gross payment status so you can get paid with no deductions, you'll need to show us that your business passes three tests.
Business test
You'll need to show us that your business:
carries out construction work - or provides labour for construction work - in the UK
is run largely through a bank account
Turnover test
We'll look at your business turnover from construction work for the 12 months before you apply for gross payment status. Ignoring VAT and the cost of materials, your construction turnover must be at least �30,000 if you're a sole-trader
show to get paid without deduction is that you earn over �30,000 a year, EXCLUDING money for materials. It's confusing, but that figure can be called either your net turnover or your gross profit. But it's only words; I think you'll know the figure. It isn't always on somebody's tax return; that's why they want you to tell 'em.
Quote from the revenue website:
Who can receive gross payments under CIS?
If you run a business that meets certain conditions, you can ask us to register you for gross payment. Your business must:
do construction work in the UK and be run largely through a bank account
have a construction turnover, excluding VAT and the cost of materials, of at least �30,000 each year (more for partnerships and most companies)
have complied with all its tax obligations
Before we can grant you gross payment status so you can get paid with no deductions, you'll need to show us that your business passes three tests.
Business test
You'll need to show us that your business:
carries out construction work - or provides labour for construction work - in the UK
is run largely through a bank account
Turnover test
We'll look at your business turnover from construction work for the 12 months before you apply for gross payment status. Ignoring VAT and the cost of materials, your construction turnover must be at least �30,000 if you're a sole-trader
Tom's pretty much covered it but when they asked for his gross income they wanted the figure inclusive of tax deducted but only insofar as it refers to labour, not materials or expenses.
If that number is less than �30k then he can't get paid gross.If it is greater then he probably can.
Not especially convinced there's any great benefit in it mind you. It has an obvious cash flow advantage right enough but few people actually use that to their advantage (by for instance investing the tax short term and making money on it before it's due to be paid over). In reality for most people they spend it and then have to find the cash to pay the tax bill at a later date, perhaps when things are tougher.
If that number is less than �30k then he can't get paid gross.If it is greater then he probably can.
Not especially convinced there's any great benefit in it mind you. It has an obvious cash flow advantage right enough but few people actually use that to their advantage (by for instance investing the tax short term and making money on it before it's due to be paid over). In reality for most people they spend it and then have to find the cash to pay the tax bill at a later date, perhaps when things are tougher.
many thanks for the help guys, it is clear to me now and so i can pass on your info. He has been sent the pack from the IR office and he'll be able to appply apparently. I also think he would be better using the pay as you go certificates but he is intending using alot of sub contractors so he thinks this would work better for him in the cash flow stakes for meeting wages
Don't forget that he'll have to make the necessary deductions from the sub-contractors' pay. And always check before using CIS to make sure you're not actually employing them. Ask the tax office to put you through to a Staus Inspector if you're not sure. See this link:
http://www.hmrc.gov.uk/new-cis/cis349.pdf
http://www.hmrc.gov.uk/new-cis/cis349.pdf
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