In the UK, the deduction on a subcontractor payment is never meant to apply to materials, a common mistake that leads to refunding over-deducted amounts, or leaves a contractor in default if they forget to deduct at all. This application separates the materials share of every invoice and refuses a payment without a valid verification of the subcontractor's status.
Who the application is for
For UK contractors using construction subcontractors, under the UK's Construction Industry Scheme.
What the application does
- Carries the deduction status returned by the tax authority for each subcontractor — gross payment, standard rate, or higher rate for want of verification — and keeps the date on which that status was obtained.
- Works out the share of the invoice not subject to deduction when it covers materials, and applies the rate to the remainder only.
- Refuses a payment if the subcontractor has no tax reference number on file.
- Works out, from the last monthly return in which the subcontractor was included, whether a fresh verification is due.
- Gathers the period's payments into a monthly return ready for filing.
- Produces, for each subcontractor paid in the period, the payment and deduction statement, with its deadline for issue.
- Refuses a materials share larger than the invoice amount, which would leave a negative labour figure.
Day to day
- Record the subcontractor's UK tax reference number on their file.
- Verify their status with the tax authority and record the result returned, with its reference.
- On each payment, separate the materials share of the invoice before letting the application work out the deduction on the rest.
- At the end of the period, attach confirmed payments to a monthly return and file it.
- Issue each paid subcontractor their payment and deduction statement before the deadline shown.
- Before filing the return, check the totals broken down into gross, materials, deduction base and deduction.
What the application does not do
- It does not connect to the tax authority on its own to check a status: verification happens on the official portal, and its result is recorded here, dated and sourced.
- It does not cover payroll, nor the question of a subcontractor's employment status, which are a separate matter.
- It does not cover the reverse-charge VAT that applies to certain construction work.
- It does not replace the advice of a UK accountant: the rates, the tax-year boundaries and the deadlines do change, and must be checked with the relevant authority.
Getting started
Set the first day of the UK tax month and tax year, and the filing deadlines, on your company record, then verify the status of every subcontractor already engaged before recording a first payment.
Going further
To find out whether this application suits your business and how to activate it, compare the plans or write to us.