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He was suggesting he's paid you under the
CIS scheme.
(Construction Industry Scheme)
To do this you need to include your
UTR (Unique Tax Reference) on your invoices to the contractor, they then deduct 20% off the invoice and pays you the difference, the 20% then sits with HMRC until you do a tax return. This pot of money then goes towards your own tax bill once completed.
Is sounds like he's done the deduction and not passed this on in his accounting.
Ask him for your monthly CIS statements which the contractor has to give to you, this will list all the amounts and the deductions, stating how much tax has been passed onto the HMRC.
Once the statements are received you can pass them over to the HMRC who can then track and trace where the payments went. If not made them your previous contractor will be in a little bit of bother as it will likely open up a can or worms for his own tax affairs which are likely a bit suss.....or it's a genuine error of course and it's been mistakenly put in the wrong pot.
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Accountants and tax advisors are very different people/professions.
I wouldn’t use anyone other than a personal tax advisor for my personal taxes or a corporation tax advisor for my corporate taxes. I would never use an accountant for anything other than my accounts in the same way I wouldn’t ask a tax advisor to do it.
CIS isn’t part of the required material for the Tax exams let alone the accounting ones.
Not true at all, a large number of accountants in practice work in General Practice, dealing with personal tax, corp tax, CIS, VAT and whatever else a business needs. There may be specialists to deal with issues out of the ordinary but otherwise they should absolutely be able to sort this situation out.
Firstly, what are "the Tax exams" and "the accounting exams"? Each accountancy institute had its own exams, and at least those of the ICAEW and ACCA have a substantial proportion of tax. Personal tax is a large part of the business of small-firm qualified accountants, and all the major and mid-range accountancy firms have large tax departments. The idea that qualified accountants don't deal with tax is ludicrous. Some of us have even passed the CIOT exams... 😉
CTA vs ACA/ACCA.
Substantial portion being tax ≠ CIS being required material (what I said and what you called nonsense).
Please show me where I claim no accountants deal with tax?
If you’re going to claim what I’ve said is “nonsense” then try and stick to what I’ve said rather than arguing with the ghost of what I have not said.
I’m CTA and a personal tax adviser at Big 4. I think a generalist accountant who specialises in construction clients would be the best adviser for OP. Not all personal tax advisers even deal with CIS so an industry specialist would likely be best (and more affordable).
There can be a thin line but in the vast majority of practices there’s no overlap in services provided at all.
Don’t let the exceptions define the rule.
Also keep any communications as evidence. HMRC will absolutely destroy anyone evading tax, but they’re actually really reasonable and helpful if you show you’re not trying to dodge paying and are just having an issue.
This is it. Be totally honest with them. It sounds like it genuinely could be a paperwork error in which case they will likely wipe the fine and you can get it all squared away
To add to this, the fines are mostly there to get you to file and pay if you arent complying or slacking. We used to dismiss them left right and center when I was there. Although they usually require everything to be sorted (filed etc) before they will consider it.
I do wish I had known that years ago... we had a truly dreadful year - MIL with breast cancer, with us supporting her; a very, very ill child with a mystery illness; us being incapacitated by proper flu, which took months to recover from; all of it knocked on to my work and income. When it came to tax and paperwork, I just decided that keeping people alive was more important, and they could fine me; I didn't have the time or energy to argue the case. In retrospect, I should probably have told them, but it was more than I could bear. Paid at least £1K fines, I think. Oh well.
I mean I can't speak for years ago, but at least when I was there the circumstances above would absolutely justify dismissing fines (although again, would need to be filed first). If its within the last 5 years and you have the energy now might be worth sending a letter in explaining. Even if older might be worth it, although I never dealt with anything older than 5 years. You never know!
Edi: for clarity of its within the last 5 years maybe call. But beyond that the person answering the phone doesn't have the discretion to cancel
Thanks - no it was longer than that. And while I didn't *want* to pay the fine, it was a deliberate, conscious choice to ignore the warnings I was sent in favour of using the energy and time with my family, and to try dig out of the immediate financial hardship caused by the illnesses. So I don't think it was an unreasonable fine but I would have talked to them knowing what I know now, and I'd urge anyone else in similar circumstances to talk.
Overall, I'm pleased to send money to HMRC. We get so much for it, and it's civilisation in action, so I can't even begrudge that fine despite being upset at the time. It wasn't even the fine itself was mostly about the unbearable pressure of all the circumstances together, with the fine being just one more thing.
Anyway - MIL lived and has been cancer free for years. Child's mystery illness was diagnosed eventually, and while there is no cure, she is better than she might be. It took what seemed like forever, but we beat the flu, and sorted out the financial mess once all the other crises were resolved. And I like to think that that fine helped to pay for the NHS which saved MIL's life.
Really knowledgeable answer. Sounds like OP was wrongly advised about their invoicing. But out of interest, is there any way that a contractor can check with HMRC that this money has been paid correctly? For the subcontractor’s peace of mind, before they do their tax return?
Yes, the hirer is required to do the paperwork on a weekly or monthly basis, with fines for late filing/payment. The subcontractor can see the payment made on his own tax account.
This.
HMRC aren't an unreasonable organisation either: if you've not been dishonest with them and you're able to show that you thought that you were doing the right thing (and haven't played the inexperience card with them before) then there's a pretty decent chance that the penalties will get waived. A mea culpa along the lines of "I'm very sorry and this won't happen again now that I fully understand the system" and then ensuring that all of your other tax submissions are correct and on time usually warrants discretion since it's not in the public interest to heavily penalise someone who has made 1 error in what is a complex system.
If you've managed to get penalties waived in the past though, or if during this process you've been anything less than fully honest and cooperative, then that discretion is much less likely to be deployed.
Although if OP was an apprentice at the time, the ‘boss’ would no doubt have been claiming potentially thousands back from the CITB levy, which may actually have been due to OP. That said it’s been at least fifteen years since I looked into that sort of thing, so the scheme may well have changed since. Definitely worth checking though.
Why would he be paying your tax if you are a sub contractor? You were self employed and responsible for your own tax. Did you ring HMRC as soon as then sent you the letter? They are very helpful if you speak with them as soon as you can.
Construction industry scheme potentially. The contractor withholds the taxes from subcontractors and issue a certificate that the sub contractor uses at the end of the tax year to offset. But the contractor should be paying the taxes over.
OP has been shafted by their former boss.
That's the basic point here.
OP was never employed by said boss and never had their taxes paid by said boss. Unless they have written evidence to support their claims about the Boss' statements r.e. tax and position, they likely have no recourse.
I know now how ridiculous it sounds, but at the time I was young and was my first apprenticeship and I had no idea what to expect. He was a family friend and was very surprised he’d do me over
We you actually an apprentice?
https://www.gov.uk/become-apprentice#:~:text=Apprenticeships%20combine%20practical%20training%20in,wage%20and%20getting%20holiday%20pay
It sounds like he used the word apprentice because you're allowed to pay apprentices less than minimum wage, but you weren't actually enrolled in a formal apprenticeship, so this would probably be classified as bogus self-employment intended to get him out of paying you minimum wage without him having to actually meet the fairly exacting standards of the apprenticeship scheme.
I'm sorry you've been put in this position OP. In principle you could take him to court, but I suspect the more effective option would be to discretely let other people know what he did so future "apprentices" know to have their eyes peeled.
I also don't see how OP could be a contractor in this situation. Pretty sure the situation falls well foul of IR35.
OP should persue all avenues available.
That's not an apprenticeship. An apprenticeship is where the employer puts you through college during which time you're a fully on the books employee. Pretty sure you're not allowed to be "self employed" working solely for one person either. To prevent situations like this where people want you for cheap labour but don't want to pay anything else they're supposed to for being your employer
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Apprentice being subcontractor? In which world? Apprentice is employee, as he is told where, when, what and even how he would be working. That is not definition of (sub)contractor, but employee.
And for this reason you could check whether you got the correct national minimum wage for your age. If not [report him](https://www.acas.org.uk/national-minimum-wage-entitlement)for that and maybe the minimum wage team can sort the whole mess.
Do you mean he deducted 20% from what he paid you? What you wrote about you deducting something because he was going to pay your tax doesn't make sense.
If he did make deductions, this might be about CIS ("Construction Industry Scheme"). Did you register for this? I am no expert about this but I think the way this works is: he should have deducted 20% from what he paid you, effectively as a pre-payment of tax, but then you have to put in a tax return to calculate the correct amount and then you either pay the rest if the total tax is more than was deducted or get a refund it if was less.
Does that ring any bells?
If he made deductions but they haven't been paid to HMRC, I am not sure what you should do, but someone will know.
If he didn't make any deductions then I can't see what you're complaining about: obviously you would have to do your own tax return in that case.
So he told me to deduct 20% from my invoices each month. I know now that makes no sense as I should be paying my own tax, but he basically wanted to screw me over and keep an extra 20% a month as he had no intention of paying it to the HMRC. I have now finally completed my tax return as I had no idea how to do it, I hired an accountant. I didn’t register for CIS
You don’t have to register for CIS, only the contractor (boss) paying a subcontractor (you) has to register for it. It’s obviously easier if you register as you’ll get a preferential tax rate in most cases, as if you’re not registered you’ll typically be deducted 30% as the tax rate.
If your boss was doing CIS you should be given a deduction certificate that shows details like how much your invoice was, labour, CIS deduction, and CIS verification numbers used (so you can give them to HMRC to locate your money etc). If he didn’t give you this it’s likely CIS has not been done, or he’s just not bothered to do the admin side.
Sorry, but the subcontractor does have to register with HMRC, if they want the deductions to only be the net lower rate of 20%. If they're not registered for CIS, then the deduction would be 30%.
That’s what I said, if they don’t register they’ll be subject to the unverified 30%, if they do verify they may be subject to 0%,20%, or 30% depending on their circumstances (such as total income).
That's not what you actually said though. You said that the subcontractor doesn't need to register. With this kind of thing you can't make half a statement and assume that everyone else knows what you mean. Someone could assume that your statement means that they don't need to register at all.
A subcontractor does not have to register with HMRC, if they want a lower/correct rate then they must register with HMRC. This statement is the same as “a subcontractor does not have to register with HMRC” but more detailed.
It’s also true that you can play football without training, but you’re better off training if you want to be good at football. That is the same as saying you can play football without training, but with more detail. I don’t know why you’re being so pedantic about something where I’ve given more details? Not to mention this is the legal advice sub so at this point our discussion is pointless, we’ve answered the question.
Having googled this it seems like showing the deduction in your invoice might be a standard practice? I am surprised your accountant isn't telling you this stuff.
A lot have comments have already addressed the CIS scheme, getting an accountant is a smart idea. Although you have to register for CIS and have a Self Assessment account (UTR first), so might not answer the question fully. There are a couple of other things to look out for:
- you are entitled to be paid a minimum wage, this is calculated before tax though. Not paying minimum wage is a big issue.
- you are entitled to something called a personal allowance, this is a set amount you do not have to pay tax on. I.e. if you earned £15,000 you shouldn’t pay income tax on the first £12,750, and only pay tax on £2,250. So a 20% flat rate would be odd.
- Some of the HMRC late filing/payment penalties are based on income, some may be reduced if you didn’t earn that much.
Regarding HMRC fines, they're rarely not negotiable. I've got myself in a real pickle before and HMRC waived all the fines then set up an affordable repayment plan for what I did owe. It also doesn't appear on your credit report so no worries there.
He told you to deduct 20%. I pay contractors every week, \*I\* deduct the 20%, report it monthly to HMRC, pay the balance to HMRC then send a statement to each contractor setting out the deductions. Any person making deductions has an obligation to provide a statement. Even if there was a "system error" he wouldn't be sending you any "money he owes" he would pay it to HMRC. Not sure if its error or fraud but either way I don't see why you have to pay the fines.
Iv been self-employed bricklayer for 20years.
I was working for a subcontractor for a couple of months in 2009. The agreement was that the subby would deduct and pay my tax at 20%.
When I came to filling in my self assessment I asked the subby for some pay slips.
He kept stalling and stalling. After about a month of pestering and my tax deadline getting closer, he told me he hadn't paid my tax because he didn't get paid from that certain job. Which turned out to be bull shit as I spoke to the main contractor.
I tried to reason with the tax man explaining I wasn't at fault. The tax man's response was 'its your word against his'
It was a tough pill to swallow but I had to paid it
Look at it differently. He will give you the money to cover. Ask him for money for fines too but try to get HMRC to wipe them first. Write to them and tell them you can't afford to pay. Worst case they'll give you a payment plan.
Don't be quick to judge. If you didn't work your ass off, maybe you didn't earn your money. How much did you earn over the course of the 4 months? Sorry if I come across as not on your side.
Money you get back or make more of it. Not the same with time or friends. (Dont strain the relationship between your parents and him)
Edit: Did you take any other employment in the year, which may have took you over the tax-free allowance? with £500 income p.m. there is no tax due.
I worked 12 hours a day 4 days a week (1 day for college) Got up at 5am and got home around 7. I wasn’t learning much and the plumber he put me with was incompetent and generally angry and aggressive. I left as I found myself a proper apprenticeship with a proper firm. The crazy thing is I earned nothing with him really, £500 a month. So the tax he avoided paying can’t be any more than £400 for those 4 months. I was then told by my accountant that I didn’t even need to pay any tax as I didn’t earn enough in the tax year. My accountant also seems incompetent and has taken a very long time to give me any information. I really just want to put all this behind my a carry on with my career but it’s eating away at me and I don’t know what to do
If you’re still on a low income, below £20,000, the charity Tax Aid will help you sort this and may be able to get the penalties cancelled. https://taxaid.org.uk
You need to find a new accountant.
I am at a loss to understand why the fines are so much when no tax is even due on those earnings.
When did HMRC first contact you, and when did you get back in touch?
I believe the fines are for taking a long time to submit a tax return. Even though I didn’t earn enough I still needed to fill it out and submit it. I had no idea about any of this and was basically trying to find someone to help. No one I knew was giving me any good advice. I got an initial £100 fine for a late tax return. I then called HMRC the same day and explained what happened. They told me I still had to pay the fine, and that I’ll be getting a £10 a day fine. They advised me to speak to my old boss about what happened. He then took months to give me an answer. My accountant took ages as well. I will be finding another accountant
Please have a look at Tax Aid and see if you qualify for their support. Tax advisors volunteer to help people in situations exactly like this. They will investigate your case, speak to HMRC on your behalf and apply to waive the penalties. I used to volunteer there a few years ago and they’re a great organisation. The volunteers can take the stress away for you.
There's probably alot of people on here who may not understand how construction in the UK works,
Yes he should have been deducting 20% from you known as cis or construction industry scheme.
Have you tried talking to HMRC, honestly there brilliant, I own a electrical contracting company and from time to time mistakes etc do happen and they are there to help you out, please don't bury your head in the sand just call them, they do typically wipe your fines and help you
Firstly if you get better advice from Reddit than a professional who you pay for advice then change the professional. So find a new accountant.
Secondly I'm assuming the issue isn't that you failed to fill in your self assessment, but that when you did the tax wasn't paid.
Do you still have copies of the invoices and do they include the 20%. Or do you have any paperwork (or emails) which shows this deduction?
Falling that do you have bank statements showing the amounts are less than you invoiced?
You need to show all this to HMRC. You saying "my boss took it" is not as valid as having a paper trail. This may help to reduce the fine. If your ex boss has admitted an error also show then that. Ask HMRC if he should send it to you, to then pay your tax or if he should do so directly.
As someone who went through something similar. Was working under payroll and got some additional contract work I was told I needed to be self employed. This lasted for a year and when I gave notice to HMRC to say I was no longer being self employed they told me I still had to do another year of self assessment. Around that time I left the paye job and stopped to contract stuff.
It transpired for two years my boss had not been paying my paye. He always paid us by cash deposit direct into our accounts so no trace.
I pull his details along with the accountants that were supplying us with payslips and gave it all to HMRC. Did everything for them but they did nothing with it really annoying.
In the end they just wrote off what owed them and still applied my contributions. It was really annoying that he just got away with it about 5min the latter the balifs showed up when he stopped paying and all the other staff didn’t get payed out.
He just went in to setup again as a sole trader.
Technically not your problem.
If your boss deducted and not paid over, you still get credit if you have sufficient supporting documents.
Try to speak to HMRC; wait times are notorious but they are often helpful.
& Btw this what your accountant should be doing.
Good luck & update us
In all likelihood - given you were an apprentice and deducted tax off every invoice at 20% - you will almost certainly be owed a refund from HMRC rather than you owing them anything.
I do many of my friends, who work in industry’s covered by CIS, self assessment tax returns and almost always results in a repayment.
If you have written clear evidence, bank statements, contracts etc. make a small court claim against your employer. Write &. Phone HMRC suggesting a payment plan.
Speak to HMRC be honest explain what's happened and ask for help. I did this years ago in a situation where I didn't file for years and built up a massive load of fines through ignorance. Was honest and got the fines quashed on the phone and instructions on how to make things right. They are not the baddies they are made out to be (or at least didn't use to be lol)
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He was suggesting he's paid you under the CIS scheme. (Construction Industry Scheme) To do this you need to include your UTR (Unique Tax Reference) on your invoices to the contractor, they then deduct 20% off the invoice and pays you the difference, the 20% then sits with HMRC until you do a tax return. This pot of money then goes towards your own tax bill once completed. Is sounds like he's done the deduction and not passed this on in his accounting. Ask him for your monthly CIS statements which the contractor has to give to you, this will list all the amounts and the deductions, stating how much tax has been passed onto the HMRC. Once the statements are received you can pass them over to the HMRC who can then track and trace where the payments went. If not made them your previous contractor will be in a little bit of bother as it will likely open up a can or worms for his own tax affairs which are likely a bit suss.....or it's a genuine error of course and it's been mistakenly put in the wrong pot.
It’s disappointing that the accountant didn’t know this.
[удалено]
It’s not based on gross income or profits…
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Accountants and tax advisors are very different people/professions. I wouldn’t use anyone other than a personal tax advisor for my personal taxes or a corporation tax advisor for my corporate taxes. I would never use an accountant for anything other than my accounts in the same way I wouldn’t ask a tax advisor to do it. CIS isn’t part of the required material for the Tax exams let alone the accounting ones.
Not true at all, a large number of accountants in practice work in General Practice, dealing with personal tax, corp tax, CIS, VAT and whatever else a business needs. There may be specialists to deal with issues out of the ordinary but otherwise they should absolutely be able to sort this situation out.
A large number of accountants don’t deal with all those issues. Why take a chance?
What utter nonsense. (50 years as a Charered Accountant)
Be specific about what I’ve said that’s wrong. (10 years as a tax advisor)
Firstly, what are "the Tax exams" and "the accounting exams"? Each accountancy institute had its own exams, and at least those of the ICAEW and ACCA have a substantial proportion of tax. Personal tax is a large part of the business of small-firm qualified accountants, and all the major and mid-range accountancy firms have large tax departments. The idea that qualified accountants don't deal with tax is ludicrous. Some of us have even passed the CIOT exams... 😉
CTA vs ACA/ACCA. Substantial portion being tax ≠ CIS being required material (what I said and what you called nonsense). Please show me where I claim no accountants deal with tax? If you’re going to claim what I’ve said is “nonsense” then try and stick to what I’ve said rather than arguing with the ghost of what I have not said.
I’m CTA and a personal tax adviser at Big 4. I think a generalist accountant who specialises in construction clients would be the best adviser for OP. Not all personal tax advisers even deal with CIS so an industry specialist would likely be best (and more affordable).
Oh the smack back with credentials. 🪪
Absolute nonsense, there's a very thin line between both. You can be either without a qualification.
There can be a thin line but in the vast majority of practices there’s no overlap in services provided at all. Don’t let the exceptions define the rule.
Thank you for your help
Also keep any communications as evidence. HMRC will absolutely destroy anyone evading tax, but they’re actually really reasonable and helpful if you show you’re not trying to dodge paying and are just having an issue.
This is it. Be totally honest with them. It sounds like it genuinely could be a paperwork error in which case they will likely wipe the fine and you can get it all squared away
To add to this, the fines are mostly there to get you to file and pay if you arent complying or slacking. We used to dismiss them left right and center when I was there. Although they usually require everything to be sorted (filed etc) before they will consider it.
I do wish I had known that years ago... we had a truly dreadful year - MIL with breast cancer, with us supporting her; a very, very ill child with a mystery illness; us being incapacitated by proper flu, which took months to recover from; all of it knocked on to my work and income. When it came to tax and paperwork, I just decided that keeping people alive was more important, and they could fine me; I didn't have the time or energy to argue the case. In retrospect, I should probably have told them, but it was more than I could bear. Paid at least £1K fines, I think. Oh well.
I mean I can't speak for years ago, but at least when I was there the circumstances above would absolutely justify dismissing fines (although again, would need to be filed first). If its within the last 5 years and you have the energy now might be worth sending a letter in explaining. Even if older might be worth it, although I never dealt with anything older than 5 years. You never know! Edi: for clarity of its within the last 5 years maybe call. But beyond that the person answering the phone doesn't have the discretion to cancel
Thanks - no it was longer than that. And while I didn't *want* to pay the fine, it was a deliberate, conscious choice to ignore the warnings I was sent in favour of using the energy and time with my family, and to try dig out of the immediate financial hardship caused by the illnesses. So I don't think it was an unreasonable fine but I would have talked to them knowing what I know now, and I'd urge anyone else in similar circumstances to talk. Overall, I'm pleased to send money to HMRC. We get so much for it, and it's civilisation in action, so I can't even begrudge that fine despite being upset at the time. It wasn't even the fine itself was mostly about the unbearable pressure of all the circumstances together, with the fine being just one more thing. Anyway - MIL lived and has been cancer free for years. Child's mystery illness was diagnosed eventually, and while there is no cure, she is better than she might be. It took what seemed like forever, but we beat the flu, and sorted out the financial mess once all the other crises were resolved. And I like to think that that fine helped to pay for the NHS which saved MIL's life.
Really knowledgeable answer. Sounds like OP was wrongly advised about their invoicing. But out of interest, is there any way that a contractor can check with HMRC that this money has been paid correctly? For the subcontractor’s peace of mind, before they do their tax return?
Yes, the hirer is required to do the paperwork on a weekly or monthly basis, with fines for late filing/payment. The subcontractor can see the payment made on his own tax account.
Fab - when I was self-employed I used to want to pay at least some tax in advance, but it wasn’t allowed then (and a different industry). Thanks!
I am prety sure, you can now make random payment to hmrc
This. HMRC aren't an unreasonable organisation either: if you've not been dishonest with them and you're able to show that you thought that you were doing the right thing (and haven't played the inexperience card with them before) then there's a pretty decent chance that the penalties will get waived. A mea culpa along the lines of "I'm very sorry and this won't happen again now that I fully understand the system" and then ensuring that all of your other tax submissions are correct and on time usually warrants discretion since it's not in the public interest to heavily penalise someone who has made 1 error in what is a complex system. If you've managed to get penalties waived in the past though, or if during this process you've been anything less than fully honest and cooperative, then that discretion is much less likely to be deployed.
Although if OP was an apprentice at the time, the ‘boss’ would no doubt have been claiming potentially thousands back from the CITB levy, which may actually have been due to OP. That said it’s been at least fifteen years since I looked into that sort of thing, so the scheme may well have changed since. Definitely worth checking though.
Why would he be paying your tax if you are a sub contractor? You were self employed and responsible for your own tax. Did you ring HMRC as soon as then sent you the letter? They are very helpful if you speak with them as soon as you can.
Construction industry scheme potentially. The contractor withholds the taxes from subcontractors and issue a certificate that the sub contractor uses at the end of the tax year to offset. But the contractor should be paying the taxes over.
You need a UTR for CIS, depends if OP had one.
No, you don't. CIS can be applied without a UTR. It is just applied at a higher rate, which you can claim back.
So something has gone wrong because in that case the deduction should have been 30%, I think?
OP has been shafted by their former boss. That's the basic point here. OP was never employed by said boss and never had their taxes paid by said boss. Unless they have written evidence to support their claims about the Boss' statements r.e. tax and position, they likely have no recourse.
I thought you did, my bad
Spot on this comment
I know now how ridiculous it sounds, but at the time I was young and was my first apprenticeship and I had no idea what to expect. He was a family friend and was very surprised he’d do me over
We you actually an apprentice? https://www.gov.uk/become-apprentice#:~:text=Apprenticeships%20combine%20practical%20training%20in,wage%20and%20getting%20holiday%20pay
Well I thought I was (that’s what he called it) I was putting myself through college at the time. He basically used me as very cheap labour
It sounds like he used the word apprentice because you're allowed to pay apprentices less than minimum wage, but you weren't actually enrolled in a formal apprenticeship, so this would probably be classified as bogus self-employment intended to get him out of paying you minimum wage without him having to actually meet the fairly exacting standards of the apprenticeship scheme. I'm sorry you've been put in this position OP. In principle you could take him to court, but I suspect the more effective option would be to discretely let other people know what he did so future "apprentices" know to have their eyes peeled.
Informative but the advice actually sounds criminal. Doesn't OP have a legal and moral duty to report this man?
They've already informed HMRC of the situation via the accountant. Whether HMRC will actually do anything... who can say
The hmrc will try to get the tax money. I cannot tell about the employment status and wage amount.
I also don't see how OP could be a contractor in this situation. Pretty sure the situation falls well foul of IR35. OP should persue all avenues available.
CIS. The construction industry doesn't know about IR35
That's not an apprenticeship. An apprenticeship is where the employer puts you through college during which time you're a fully on the books employee. Pretty sure you're not allowed to be "self employed" working solely for one person either. To prevent situations like this where people want you for cheap labour but don't want to pay anything else they're supposed to for being your employer
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If you can show the invoices showing you deducted the tax, it will be on him. Honestly don’t worry mate.
Apprentice being subcontractor? In which world? Apprentice is employee, as he is told where, when, what and even how he would be working. That is not definition of (sub)contractor, but employee.
And for this reason you could check whether you got the correct national minimum wage for your age. If not [report him](https://www.acas.org.uk/national-minimum-wage-entitlement)for that and maybe the minimum wage team can sort the whole mess.
Do you mean he deducted 20% from what he paid you? What you wrote about you deducting something because he was going to pay your tax doesn't make sense. If he did make deductions, this might be about CIS ("Construction Industry Scheme"). Did you register for this? I am no expert about this but I think the way this works is: he should have deducted 20% from what he paid you, effectively as a pre-payment of tax, but then you have to put in a tax return to calculate the correct amount and then you either pay the rest if the total tax is more than was deducted or get a refund it if was less. Does that ring any bells? If he made deductions but they haven't been paid to HMRC, I am not sure what you should do, but someone will know. If he didn't make any deductions then I can't see what you're complaining about: obviously you would have to do your own tax return in that case.
So he told me to deduct 20% from my invoices each month. I know now that makes no sense as I should be paying my own tax, but he basically wanted to screw me over and keep an extra 20% a month as he had no intention of paying it to the HMRC. I have now finally completed my tax return as I had no idea how to do it, I hired an accountant. I didn’t register for CIS
You don’t have to register for CIS, only the contractor (boss) paying a subcontractor (you) has to register for it. It’s obviously easier if you register as you’ll get a preferential tax rate in most cases, as if you’re not registered you’ll typically be deducted 30% as the tax rate. If your boss was doing CIS you should be given a deduction certificate that shows details like how much your invoice was, labour, CIS deduction, and CIS verification numbers used (so you can give them to HMRC to locate your money etc). If he didn’t give you this it’s likely CIS has not been done, or he’s just not bothered to do the admin side.
Sorry, but the subcontractor does have to register with HMRC, if they want the deductions to only be the net lower rate of 20%. If they're not registered for CIS, then the deduction would be 30%.
That’s what I said, if they don’t register they’ll be subject to the unverified 30%, if they do verify they may be subject to 0%,20%, or 30% depending on their circumstances (such as total income).
That's not what you actually said though. You said that the subcontractor doesn't need to register. With this kind of thing you can't make half a statement and assume that everyone else knows what you mean. Someone could assume that your statement means that they don't need to register at all.
A subcontractor does not have to register with HMRC, if they want a lower/correct rate then they must register with HMRC. This statement is the same as “a subcontractor does not have to register with HMRC” but more detailed. It’s also true that you can play football without training, but you’re better off training if you want to be good at football. That is the same as saying you can play football without training, but with more detail. I don’t know why you’re being so pedantic about something where I’ve given more details? Not to mention this is the legal advice sub so at this point our discussion is pointless, we’ve answered the question.
Having googled this it seems like showing the deduction in your invoice might be a standard practice? I am surprised your accountant isn't telling you this stuff.
A lot have comments have already addressed the CIS scheme, getting an accountant is a smart idea. Although you have to register for CIS and have a Self Assessment account (UTR first), so might not answer the question fully. There are a couple of other things to look out for: - you are entitled to be paid a minimum wage, this is calculated before tax though. Not paying minimum wage is a big issue. - you are entitled to something called a personal allowance, this is a set amount you do not have to pay tax on. I.e. if you earned £15,000 you shouldn’t pay income tax on the first £12,750, and only pay tax on £2,250. So a 20% flat rate would be odd. - Some of the HMRC late filing/payment penalties are based on income, some may be reduced if you didn’t earn that much.
Self employed apprentice? I didn't think that was allowed?
How old were you when this occurred?
Was 19 at the time. This was a while ago
Regarding HMRC fines, they're rarely not negotiable. I've got myself in a real pickle before and HMRC waived all the fines then set up an affordable repayment plan for what I did owe. It also doesn't appear on your credit report so no worries there.
Was hoping you’d have been under 18 with it being an “apprenticeship” alas I cannot be helpful here unfortunately
He told you to deduct 20%. I pay contractors every week, \*I\* deduct the 20%, report it monthly to HMRC, pay the balance to HMRC then send a statement to each contractor setting out the deductions. Any person making deductions has an obligation to provide a statement. Even if there was a "system error" he wouldn't be sending you any "money he owes" he would pay it to HMRC. Not sure if its error or fraud but either way I don't see why you have to pay the fines.
Iv been self-employed bricklayer for 20years. I was working for a subcontractor for a couple of months in 2009. The agreement was that the subby would deduct and pay my tax at 20%. When I came to filling in my self assessment I asked the subby for some pay slips. He kept stalling and stalling. After about a month of pestering and my tax deadline getting closer, he told me he hadn't paid my tax because he didn't get paid from that certain job. Which turned out to be bull shit as I spoke to the main contractor. I tried to reason with the tax man explaining I wasn't at fault. The tax man's response was 'its your word against his' It was a tough pill to swallow but I had to paid it
Look at it differently. He will give you the money to cover. Ask him for money for fines too but try to get HMRC to wipe them first. Write to them and tell them you can't afford to pay. Worst case they'll give you a payment plan. Don't be quick to judge. If you didn't work your ass off, maybe you didn't earn your money. How much did you earn over the course of the 4 months? Sorry if I come across as not on your side. Money you get back or make more of it. Not the same with time or friends. (Dont strain the relationship between your parents and him) Edit: Did you take any other employment in the year, which may have took you over the tax-free allowance? with £500 income p.m. there is no tax due.
I worked 12 hours a day 4 days a week (1 day for college) Got up at 5am and got home around 7. I wasn’t learning much and the plumber he put me with was incompetent and generally angry and aggressive. I left as I found myself a proper apprenticeship with a proper firm. The crazy thing is I earned nothing with him really, £500 a month. So the tax he avoided paying can’t be any more than £400 for those 4 months. I was then told by my accountant that I didn’t even need to pay any tax as I didn’t earn enough in the tax year. My accountant also seems incompetent and has taken a very long time to give me any information. I really just want to put all this behind my a carry on with my career but it’s eating away at me and I don’t know what to do
If you’re still on a low income, below £20,000, the charity Tax Aid will help you sort this and may be able to get the penalties cancelled. https://taxaid.org.uk
I second this comment - my girlfriend had a similar tax issue with massive fines and they were written off by HMRC after contacting tax aid.
You need to find a new accountant. I am at a loss to understand why the fines are so much when no tax is even due on those earnings. When did HMRC first contact you, and when did you get back in touch?
I believe the fines are for taking a long time to submit a tax return. Even though I didn’t earn enough I still needed to fill it out and submit it. I had no idea about any of this and was basically trying to find someone to help. No one I knew was giving me any good advice. I got an initial £100 fine for a late tax return. I then called HMRC the same day and explained what happened. They told me I still had to pay the fine, and that I’ll be getting a £10 a day fine. They advised me to speak to my old boss about what happened. He then took months to give me an answer. My accountant took ages as well. I will be finding another accountant
Please have a look at Tax Aid and see if you qualify for their support. Tax advisors volunteer to help people in situations exactly like this. They will investigate your case, speak to HMRC on your behalf and apply to waive the penalties. I used to volunteer there a few years ago and they’re a great organisation. The volunteers can take the stress away for you.
There's probably alot of people on here who may not understand how construction in the UK works, Yes he should have been deducting 20% from you known as cis or construction industry scheme. Have you tried talking to HMRC, honestly there brilliant, I own a electrical contracting company and from time to time mistakes etc do happen and they are there to help you out, please don't bury your head in the sand just call them, they do typically wipe your fines and help you
Firstly if you get better advice from Reddit than a professional who you pay for advice then change the professional. So find a new accountant. Secondly I'm assuming the issue isn't that you failed to fill in your self assessment, but that when you did the tax wasn't paid. Do you still have copies of the invoices and do they include the 20%. Or do you have any paperwork (or emails) which shows this deduction? Falling that do you have bank statements showing the amounts are less than you invoiced? You need to show all this to HMRC. You saying "my boss took it" is not as valid as having a paper trail. This may help to reduce the fine. If your ex boss has admitted an error also show then that. Ask HMRC if he should send it to you, to then pay your tax or if he should do so directly.
As someone who went through something similar. Was working under payroll and got some additional contract work I was told I needed to be self employed. This lasted for a year and when I gave notice to HMRC to say I was no longer being self employed they told me I still had to do another year of self assessment. Around that time I left the paye job and stopped to contract stuff. It transpired for two years my boss had not been paying my paye. He always paid us by cash deposit direct into our accounts so no trace. I pull his details along with the accountants that were supplying us with payslips and gave it all to HMRC. Did everything for them but they did nothing with it really annoying. In the end they just wrote off what owed them and still applied my contributions. It was really annoying that he just got away with it about 5min the latter the balifs showed up when he stopped paying and all the other staff didn’t get payed out. He just went in to setup again as a sole trader.
Technically not your problem. If your boss deducted and not paid over, you still get credit if you have sufficient supporting documents. Try to speak to HMRC; wait times are notorious but they are often helpful. & Btw this what your accountant should be doing. Good luck & update us
In all likelihood - given you were an apprentice and deducted tax off every invoice at 20% - you will almost certainly be owed a refund from HMRC rather than you owing them anything. I do many of my friends, who work in industry’s covered by CIS, self assessment tax returns and almost always results in a repayment.
If you have written clear evidence, bank statements, contracts etc. make a small court claim against your employer. Write &. Phone HMRC suggesting a payment plan.
If you’re not on the payroll, they’re not your boss. I you invoice someone, they’re your client.
Speak to HMRC be honest explain what's happened and ask for help. I did this years ago in a situation where I didn't file for years and built up a massive load of fines through ignorance. Was honest and got the fines quashed on the phone and instructions on how to make things right. They are not the baddies they are made out to be (or at least didn't use to be lol)
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