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Recording Self Employment & CIS payments.

Excel is a good place to list these things but you don't need a

> template, just do it as you would on paper. > > If you are a builder/decorator then the Subcontractors Schemes are > going to make life more complicated for you, if you are in IT watch out > for IR35, and there are a host of other things which if we had more > infomation people here could help you with.

Thanks for this.

Trying to sort out some kind of record system for someone, who has been told by his previous employer that he has to become "self employed". He currently works with someone else, who "has contacts" to get the work (building/plumbing etc).

Turns out to be as follows.

Until 1 Jan, was PAYE, since then combination of self employment & CIS (i.e flat rate deduction made from payments)

When working as Self Employed gets paid directly by the person having the work done (hence no deductions made)

When working as a "subcontractor" for a seperate building company get paid under CIS (with deductions)

Payment could be cash or cheque - and frequency depends on work.

Would be be advisable to set up a seperate bank account for income (to keep personal spending seperate).

The PAYE earning receive the P60, The CIS payments are supported with the CIS25 which shows payment and deductions, so this is a evidence of income. I am slighly concerned by the "self employed" payments. These appear to be varying cash/cheque payments for work done but have no paperwork to support (presumably the invoice for the total work goes to the main person he is working with). Is this acceptable?

For record keeping what should be recorded? How should my current thoughs be ammended?

1) Keep diary of place of work each day. 2) Keep two seperate sheets. One for Cash. One for Banking. Both as follows.

Date, Comments, Receipt, Payment, Balance

List all receipts, list CIS receipts as receipt and tax payment seperately. Pay in cash = Payment Cash and Receipt Banking. Any money taken out for "personal" spending is listed as Payment to Drawings (is any further record required?)

Person he is working with wants "petrol money" - I dont however that any paperwork is received in return? Can this be claimed as an expense or must it be from drawings (due to lack of paperwork?). The person he is working with has told him to claim mobile phone bills, clothes etc. However I feel that this is not a expenses incurred in business (i.e only private calls are made etc) - Am I right or wrong?

How are NI contributions handled? Are any NI deductions made through CIS? How should contributions be paid?

Any other thoughts or advice?

Reply to
Pete
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Maybe this is a bit too much information!

Okay.

Correct.

This is still Self Employed, add the Tax to the Gross and that is his Sales figure.

Quite normal must most plumber/builders don't declare the Cash so you seem to have an honest trader which is good.

Yes.

It's not acceptable and you will have to get him issuing proper numbered invoices in the furure, if only for your own sanity, but it is pretty normal in this sort of start-up and what can you do? It's not worth going back and dreaming up invoices.

If he is travelling between contracts on a regular basis this might just about be advisable, but no this is *way* too much detail. He should keep a detailed log in his car as I said before.

You could shortcut the Bank side of things by writing little notes on the Bank Statement itself. Otherwise make sure that the two sets of records are reconcilable, Bank Record and Bank Statements.

Most outgoings will (presumably) be Drawings if we are in his Private Bank Account, make sure you list (on the Bank Statements maybe) which Invoices are being settled by which Bank Receipts.

You will at some stage have to do your list but by then you will want to "post" it straight into Sage (or whatever) and save yourself a double labour.

You see the trouble with all these lists is going to be reconciling them.

Lack of paperwork is a commonplace in these sorts of accounts, I shouldn't worry about it.

"Telephone 75%" is a standard phrase that never seems to offend anyone though it is usually ludicrous. Work boots and overalls certainly.

I'll leave this one to the experts. You probably don't need top do all this, you will just get in a jumble. Maybe ignore everything I've said about Sage and just compile a few lists in Excel showing the detail in the following set of accounts:

Sales XXXXX

Materials XXXX Workwear XXXX Telephone (75%) XXXX Travel XXXX (your petrol money) _____ (XXXXX) ----- XXXXX ====

** Make sure that comes to a sensible amount that can support his lifestyle otherwise the tax inspector will roast him alive ****

You will also as the months go by need to keep a 12 month running total to see when he is approaching the VAT threshhold.

Reply to
Troy Steadman

A quick review then:

He isn't driving a car so forget all logs and diaries.

To prevent you getting into a hopeless muddle why not start him off from a suitable date in the near future doing things properly:

Issuing proper invoices Using a business Bank Accounts Returning his CIS forms on time (very important) Entering his transactions into Sage, or listing them in Excel, whichever is easier

*BUT*

for the past and for the period up to that date put together the best estimates you can hanging on to whatever whatever lists you use but not busting a gut over it - if he's lost his receipts for his work boots put in £52 for the year or whatevever you think is honest - and go with that.

Use your valuable time to get him straight for the future, don't dwell too much on the mess in the past. Estimates are not the least bit unusual.

Other expenses he can claim:

Postage and Stationery £52 Bookkeeper £? Sundries £52 Bank Charges & Interest 75%

Reply to
Troy Steadman

You'd be better off posting these sorts of questions in uk.business.accountancy where there are not only Chartered Accountants but also all the experts from this group and to top it all a Tax Inspector, Simon.

Here's a link to the NI info:

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The Class II he should be paying already by small monthly direct debit, the Class IV is calculated on the profits and will appear on his assessment alongside the Income Tax.

I presume this is a young lad who has just started trading? Reputation is everything in Building/Plumbing and someone with a good reputation gets work and money flooding in. That can create all kinds of problems and I'll post a problem the best Builders face in uk.b.a later on today.

In the mean time I know you mean well and will try your best but spending a few hundred quid on proper professional advice at this early stage could be a very good investment.

Reply to
Troy Steadman

thanks for the pointer - Missed that grouped when I was looking for a group to post to. Have posted a copy now.

I will suggest it (again) - but convincing someone that paying something out is beneficial is difficult!

Reply to
Pete

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