Special tax rules exist for payments made in the Construction Industry to self employed sub contractors.
These rules require a contractor:
- Verification of the subcontractors tax status
- Deduction of tax from payments, depending on the subcontractors tax status
- Reporting of amounts paid to subcontractors
Contractor, in its simplest form, is any business in the Construction Industry paying someone else for Consruction Services – so depending on the chain, a business can find itself being both a Sub Contractor and a Contractor.
The scope of “Construction Services” is quite wide, and can catch services which, at first glance, you wouldn’t consider to be construction.
Sub Contractors, may:
- Have Gross Payment Status – meaning no tax need be stopped by the Contractor. There are strict conditions for getting Gross Payment Status
- May be “registered” meaning the Contractor deducts 20% on payments (excluding materials and vat)
- May be “un registered” meaning the Contractor deducts 30% on payments (excluding materials and vat)
Read more about the Construction Industry Scheme from HMRC