Sole trade subcontracting projects

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eddie10

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I’m a sole trader in first year of business, and sometimes subcontract work out to other people when things are particularly busy. Income is still very inconsistent though and I’m not in a position to employ someone (even on part time basis) at this stage.
I’m wondering how I account for this out-sourced work in my accounts at the end of year (the individuals I use are not part of a company, or business), and have I any obligation to them at all… is it up to themselves how they handle their own tax affairs?
Any advice much appreciated.
 
All you need is a proper invoice (including name and address, company number if a ltd company, VAT number if VAT registered etc etc), from the subcontractor. You are not responsible for their tax affairs, although I always make a point of verifying that a subcontractor who is charging VAT is actually registered for VAT. Fees paid out to subcontractors are accounted for in the same way as any other business costs. So if you charge your client 1,000 and you subcontract the job out for 800, for example, you show a contribution of 200 towards the taxable profits for the year.

It's worth going over this (and any other questions you might have about your accounts and record keeping) with your accountant or other advisor.
 
A caveat - if your subcontractor is a de-facto employee (not sure of how the revenue defines this, but I'd imagine it means he or she works exclusively and full time, or practically full time, for you) well then you may find yourself obliged to treat them like a regular employee (stopping tax and prsi, paying employer's prsi, and fulfilling the usual employer obligations).

Doesn't sound like this is the case for you but good to be aware of it.
 
extopia said:
not sure of how the revenue defines this
Click to expand...

There's a leaflet on the Revenue website about this - haven't got the address handy as I printed it off. It's a bit of a grey area, but it is very useful to check out.
 
Great - thanks, I'll do that. I'm hoping there won't be any obligation on my part as I use a few different people for various jobs but on a very ad hoc basis so they certainly couldn't depend on income from me. Some of them work full time as PAYE and do work for me by night - do they need accountants (even though additional income is small) or is there some form they can use?
Thanks for any and all advice.
 
You don't really have to concern yourself with this as your subcontractors are responsible for their own tax affairs and if they need the services of an accountant they can certainly engage one. They can file their own form 11 to declare their extra non paye income, or if they are not comfortable doing so they could hire an accountant to fill in the form and post the cheque on their behalf.
 
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