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Sam
Sam, Accountant
Category: Tax
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I am self employed and "employ" a sub-contractor on practically

Resolved Question:

I am self employed and "employ" a sub-contractor on practically a full time basis. He gets paid gross and completes his own tax self assessment.
His accountant has got him a rebate tax year 2013/14, and he had a rebate the previous year, yet I don't deduct tax (CIS or otherwise), he doesn't pay tax PAYE or on account, has minimal receipts (as I buy all materials) etc.
Are there any circumstances where this is possible? Even if his receipts take him below his personal allowance threshold, can he get a rebate difference from his unused allowance! As far as I understood it, the personal allowance has a "use it or lose it" status.
I ask because I do not want the repercussions of any investigations into him to come my way.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Thanks question
First you should be paying this individual through the CIS scheme as clearly you engage him a regular basis, so make sure you address this payments you make - or HMRC will come to you monthly late return penalties and tax due so this is something you need to rectify straight away.
There is always a chance he works else, and does have CIS deducted - or has another source of income on which he suffers tax (pension, employment)
But you are right if no tax is paid then use of unused allowances does not in itself create a tax rebate, so there has to be two sets of circumstances arising here and that s tax has been suffered on another source and there all incomes are below the tax free allowances OR that he does claim expenses
But if he works full time (in which case you should be deducting CIS tax) so suffers no tax, and has no other source of income (which you could never be 100% certain of) and has no expenses, then it would be unusual to see a refund arising.
But as long as you rectify the position you are in, then any wrong doing that might exist on his and his accountants part - will not come back to be an issue
Thanks
Sam
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Customer: replied 2 years ago.

He does put in expenses but these would have to be in excess of £12K to take him below his personal allowance level.

If he did, and they did break the PA threshold, would that create a rebate, effectively a rebate from his unused personal allowance?

I didn't think this was possible. He has no other income source, pension or otherwise.

Expert:  Sam replied 2 years ago.

Thanks response
No - as already advised if no tax has been suffered then unused personal allowances cannot create a tax refund, nor could an expenses claim.
Thanks
Sam