This chapter contains these topics:
The economic environment in the United Kingdom construction industry is diverse and complex. A business owner or main contractor can employ many subcontractors in the execution of a contract. To meet statutory requirements, especially in the area of taxation, contractors must maintain careful records of the subcontractors that they employ and the withholding tax that these subcontractors are required to pay.
J.D. Edwards solutions for subcontracting requirements in the United Kingdom include the following tasks:
Working with applications and certificates
Working with vouchers for subcontractor payments
Processing withholding amounts for subcontractors
Working with subcontractor reports
The Inland Revenue Service requires contractors to help enforce the tax withholding rules that apply to subcontractors through 714/715 processing. The process includes the following steps:
| Step | Explanation |
|---|---|
| Subcontractor applies for a tax certificate | Subcontractors are required to apply for a tax certificate (714). The Inland Revenue Service assigns specific types of tax certificates to specific types of subcontractors, including Company, Individual, Partner, and Special. The certificate type indicates the tax withholding rules that are to be applied to any wage earned by the subcontractor. The tax certificate is effective through a given date and is proof that the subcontractor is eligible for hire. |
| Contractor validates tax certificate | Before a contractor can pay a subcontractor for any work, the contractor must validate the subcontractor's tax certificate. The validation includes confirming the effective date of the certificate and an evaluation of the tax certificate type to determine any amounts which may be tax exempt. |
| Subcontractor remits 715 receipt | The subcontractor is required to remit to the contractor a 715 receipt for any payments that the subcontractor receives from the contractor during a given period of time. The contractor must receive the 715 receipt for previous payments before issuing any subsequent payments. |
| Contractor reports withholding tax | The contractor is required to report subcontractor tax withholding to the Inland Revenue Service periodically. |
Subcontractors in the United Kingdom are required to apply to the contractor for payment based on estimates of work that has been completed on a contract. Tracking the application and certification information for a contract is an industry practice in the United Kingdom.
The application and certification of payment on a contract includes the following steps:
| Step | Explanation |
|---|---|
| Subcontractor submits application | The subcontractor submits to the contractor an application for payment. The application includes an estimate of the work that has been completed on a specific contract. |
| Contractor certifies stated work is complete | The contractor certifies that the stated work has been completed. The certification is based on an independent survey to estimate the actual work completed on the contract. |
| Contractor states payment amount | After the work is certified as complete, the contractor informs the subcontractor of the amount available for payment on the contract. |