From 1st April 2017 labour hire firms have an obligation to deduct withholding tax when they make payments to contractors. The contractor will either elect their own withholding rate (minimum 10%) or will be taxed at a standard rate: 20%. This also applies to contractors who work through their own company.
You will need to get your contractors to submit an IR330 Tax Code Declaration Form. Without this they should be taxed at 45%.
More information about the change can be found here.
What do I need to do in FlexiTime?
The first thing that you need to do is ensure that withholding tax will be added in to your contractors' pays. Edit each contractor and on the Employment tab, enter the deduction rate:
Then check that there is a line for tax in the contractor's default pay:
By default FlexiTime will automatically add Tax to all new employees. If you have only contractors this setting may have been turned off for you. Email [email protected] to have this re-instated. In doing so, the Tax line will be automatically added to all your existing contractors.
By including a Tax line in a contractor's pay, withholding tax will be automatically calculated and included in your Inland Revenue Returns. If your contractors are set up in a different FlexiTime account to your salaried staff, please contact us to have the companies linked so that the contractor withholding tax is added into the returns you run in your head office company.