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• # 90774
• Sun 12 May 2013 09:19 AM

Hi,

i have been asked to look at a friends self assessment who is registered as a self-employed subcontractor for one firm. I am sure I am correct in thinking that he will be liable for class 4 National insurance on his profits as he is self-employed? He was expecting a tax refund of about £1800 which was correct however he wasn't expecting to have to pay the national insurance bill of £1800! He insists that all his colleagues have received refunds and do not pay class 4 but I can not find any information to see if he would be exempt from this. His income was £33,000 with expenses of £1329.00 and he paid the standard 20% tax through the scheme. 
I have rang Hmrc to check his employment status and they tell me he must be self employed to be in the scheme.

Am I missing something here? Sorry this is new to me and I really would appreciate some help!

Thank you,

Zoe.
 

• Zoe Corfield
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• # 91580
• Fri 14 Jun 2013 02:04 PM

Hi Zoe,

Your client is liable to Class 4 NIC on his subcontracting profits in the same way as any other self-employed person unless he is exempt by reason of youth or age.  You can't, of course, discuss other people's affairs with him in detail, but it is possible they don't realise Class 4 NIC is part of the self-assessment tax bill.  As to whether he gets a bill or a rebate, it depends on the level of his profits, which may be different from other people's.

Regards,

Jonathan

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• # 91592
• Fri 14 Jun 2013 07:43 PM

That expenses figure seems very low, are you sure it's right? CIS subcontractors often get refunds because their expenses bring their net profit down-purchases, travel, telephone, a bit of use of home as office, insurance, small tools and equipment etc.

• Ruth
  www.shoreaccounting.co.uk

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• # 91593
• Fri 14 Jun 2013 09:03 PM

You're not missing anything, you are correct.

The only thing I think is that your client may just be misunderstanding you about the Class 4 contributions as they would have been deducted from the rebates his colleagues received if their net profits were high enough. He may be thinking that you are saying he would have to pay these over seperately.

I know that the CIS contractors I do tax returns for only ever look at the bottom line of how much they will get back and don't consider how the figure is calculated.

I agree with Ruth, the expenses are low, but if he's purely sub-contracting and not having to purchase any materials or travel any distance then it is possible.

Victoria 

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