The fuel costs come to £2,000, which the subcontractor pays by credit card. The value of a construction contract is £10,000, including the payment of the subcontractor’s fuel costs. The contractor should give the subcontractor a PDS showing a gross payment of £10,000, with deductions of £2,000 for CIS and £1,000 for accommodation. The deduction will be £2,000, based on total payments of £10,000. The contractor should make a CIS deduction at the appropriate rate - 20% in this example. The contractor pays £1,000 directly to the hotel, leaving £9,000 due to the subcontractor. The subcontractor’s hotel accommodation costs £1,000. The value of a construction contract is £10,000, including the payment of the subcontractor’s accommodation expenses. The contractor will account for this expenditure in their own records but the subcontractor must not claim any accommodation expenses as well, as they have not had to pay for or contribute towards its provision.Īlternatively, if the contractor passes on all, or some, of the costs of providing the accommodation to the subcontractor, then that amount will be included in the PDS. Where the contractor arranges for a third party to provide accommodation to a subcontractor, such as a local hotelier, if the contractor pays for that accommodation and at no point passes on all (or some) of those costs of providing that accommodation to the subcontractor, then subcontractors Payment Deductions Statement (PDS) should not include any entry relating to accommodation costs. Where a contractor makes a payment to a supplier in respect of a subcontractor’s travel, subsistence or accommodation it is very likely that this is a contract payment and that a CIS deduction is due on that payment. However, such arrangements will not be common and may imply the existence of an employer/employee relationship (subject to PAYE) rather than a contractor/subcontractor relationship (subject to CIS). A deduction will not be due, even if the contractor is paying a third-party for the facilities, provided these payments are not passed on to the subcontractor thereafter. (See examples 1 & 2 below).Ī deduction will not be due where a contractor allows the subcontractor to use the contractor’s own facilities - such as vehicles or accommodation. The total amount deducted by the contractor should reflect the gross amount of the payments due under the contract, including the payment of expenses on the subcontractor’s behalf. As such they will result in a deduction under the Scheme, by virtue of FA04/s61.Īn obligation upon a contractor, under a construction contract, to pay a subcontractor’s expenses will fall within FA04/s60 regardless of whether the obligation is written, verbal, express or implied.Ī payment made in respect of a subcontractor’s expenses will fall within FA04/s60 regardless of whether the contractor pays or reimburses the subcontractor, pays their expenses directly or pays a nominated third party. Where a construction contract places an obligation upon a contractor to pay a subcontractor’s expenses (such as travel, subsistence and accommodation expenses) such payments form part of the overall value of the contract, by virtue of FA04/s60.
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