The Figure You Have to Be Satisfied About
A British contractor files a return every tax month naming each subcontractor paid, what they were paid, and how much of that payment was materials. That third figure is defined as the amount the contractor is satisfied represents the subcontractor's own cost of materials — which is not a number on any document the contractor holds.
Most withholding regimes ask software for arithmetic: take a percentage of a payment, remit it, report it. The British construction scheme asks for something else in the middle of that, and it is the most interesting requirement we have read this year — because it is not a calculation and it is not a lookup.
Every tax month, for each subcontractor paid under deduction, the return must state the total amount included in those payments which the contractor is satisfied represents the direct cost to any person other than the contractor of materials used or to be used on the contract.
Read that twice, because two phrases in it are doing work. "Which the contractor is satisfied represents" — it is your conclusion, not your subcontractor's assertion. And "the direct cost to any person other than the contractor" — it is what the materials cost them, not what they charged you for them.
The figure is a judgement about somebody else's costs, reported monthly to a tax authority, signed for. No invoice line contains it.
What the return actually carries
Worth laying out, because the shape is unusual: it is a monthly filing whose content differs per counterparty according to how that counterparty is registered.
| If the subcontractor is — | The return states |
|---|---|
| Registered for gross payment | Their tax reference, and the total paid in the month. Nothing else. |
| Registered for payment under deduction | Their tax reference, the total paid, the materials figure, and the total deducted. |
| Not registered | The same three amounts, their tax reference if known, and a verification reference. |
The return goes in within fourteen days of the end of the tax month, and a nil return is due on the same clock if you paid nobody in the following month — unless you have told the authority that you will make no further payments within six months. So the absence of activity is itself a filing.
And a statement to each subcontractor, on the same clock
Separately from the return, each subcontractor paid under deduction gets a written statement within the same fourteen days, either for the month's total or per payment: your name, your employer's reference, the month or the payment date, their name, their tax reference, the total paid, the same materials figure, and the amount deducted.
The delivery rules on that statement are the part software people should notice. It can go electronically only if you have indicated you intend to use electronic delivery, the subcontractor has consented, that consent has not been withdrawn, and the format is one the statement can be stored in and printed from on paper.
Which is a consent record, not a delivery setting
Three facts have to be held per subcontractor before an emailed statement is lawful: that you told them you intended to use electronic delivery, that they agreed, and that they have not since changed their mind. Most systems have a "send by email" checkbox, which records none of those. We have a supplier portal with a login per person, which is arguably a better channel than email — and a portal is still a delivery mechanism rather than a record of consent, and we hold no consent.
The declaration is three assertions, and one of them is about employment
The return carries a declaration by the person filing it. Three limbs: that the return is complete and accurate to the best of your knowledge and belief; whether you carried out the required verification of each subcontractor's registration status; and — the one that stops people — that none of the contracts to which the return relates is a contract of employment.
That is an employment-status question embedded in a monthly tax filing, asserted by a named person, every month, about every relationship on the return. It is worth noting alongside something we have written about our own product: a project here can pay a person through its own document, running beside payroll, with neither knowing about the other. A monthly declaration about which relationships are employment is exactly the sort of thing that becomes hard when the same person can be paid two ways.
Our purchase side against all of that
Directly, because there is no useful version of this that is vague. A payment out of this product is a gross amount: there is no withholding of any kind on a supplier payment, in any market. A purchase order line is an item, a quantity, a price and a total, with nothing on it to say what part of that is labour and what part is material, and no tax on the order at all.
And a detail we found while checking, which says something about how the product grew: the only tax identifier anywhere in the supplier family is a Kenyan tax PIN, and it lives on the prequalification application rather than on the vendor the application becomes. So a supplier who was onboarded through the form has a tax number attached to a document about them, and a supplier who was typed straight into the register has nowhere to put one. Both halves of that are worth fixing and the second is the one that would surprise people.
What we do have is the money side, properly: every payment out recorded with its rail, its reference, its status and the order it settles, in one register, with the document behind it attachable and every read of that document logged. What we do not have is anything that turns a month of those payments into a return, or a subcontractor into a party with a tax status somebody looked up.
The distinction worth drawing about verification
We do verify suppliers. Prequalification takes an application, a reviewer, documents, a score and a validity date that lapses on its own, and a vendor can be marked active, preferred or blacklisted.
That is our judgement about a supplier, recorded by us. What this scheme requires is a third party's determination of the supplier's status, obtained before you pay them, which changes what you must deduct and — where they are unregistered — returns a reference you have to quote on the filing. Those are different objects that use the same word, and a system that has the first will look as though it has the second. Ours does not, and the shape of the gap is a reference obtained from outside with a date attached, not a flag somebody set.
Why this matters outside Britain
Because the hard requirement here is not the withholding, which is arithmetic anybody can implement. It is that a reportable figure is defined by what you are satisfied is true about another business's costs — and several subcontractor withholding regimes around the world carve out materials in some form for the same reason, that taxing a pass-through cost at source would over-withhold.
So the question a purchasing system should be able to answer, anywhere, is a modest one: can a payment be recorded as being composed of things, with the composition carried onto the payment rather than living in a description? Ours cannot, and adding a line type is the smallest of the builds below. Adding the judgement behind it is not something software does at all — and a field that lets somebody record their conclusion, with who reached it and when, is genuinely better than a number typed into a return once a month with no trail.
Four questions for a system you plan to run subcontractors through
Can a payment out be split into labour and materials?
What you will probably hear
A description of two lines on an order, or of a note.
How to read it
Two lines is a real answer if the split survives onto the payment and can be totalled for a period. A note is not. Ask to see a report of one month's payments to one supplier with the split showing, because that is the shape a return takes.
Where does a supplier's tax reference live?
What you will probably hear
Usually a field, sometimes a custom one.
How to read it
Ask whether it is on the supplier or on a document about the supplier, and whether every supplier has one regardless of how they were created. Ours is on an application form and it is country-specific, which we would rather tell you than have you find out.
Can the system hold a status about a supplier that came from a tax authority, with the reference it returned?
What you will probably hear
A description of the vendor's own status flags.
How to read it
Internal flags and an external determination are different objects wearing the same word. The tell is whether the answer includes a reference number and a date obtained, because that is what a third-party verification returns and an internal flag never has.
Do you record that a counterparty consented to receive documents electronically?
What you will probably hear
An email preference.
How to read it
A preference is what you chose. Consent is what they agreed to, and it can be withdrawn. Almost no system distinguishes them, and where a rule makes electronic delivery conditional on consent, the preference is not evidence of anything.
What AWRA OpsHub does today
- Every payment to a supplier in one register, with the rail, the provider, the reference, the amount, the status and the order it settles, and the person who recorded it.
- Purchase orders with lines, each an item, a quantity, a price and a total, so what was ordered is itemised even where the payment is not.
- A supplier portal with a login per person, on its own guard, so a document can be put in front of a supplier rather than emailed to them.
- Documents attached to a purchase order through a vault with a classification on each file and every view and download logged.
- Suppliers marked active, preferred or blacklisted, and prequalified with a reviewer, a score and a validity date that lapses on its own.
- Vendor spend for any period grouped by supplier, with the order count, the total, the amount paid and the balance outstanding.
More we can add to your workspace
- A composition on a payment — a labour part and a materials part carried onto the payment itself and totalled over a period, which is the shape any return of this kind takes.
- A tax reference on the supplier record, held for every supplier however they were created, rather than a country-specific identifier on the application form that preceded them.
- A withholding on a payment out, computed at a rate that depends on the counterparty's status, with the amount deducted and the amount paid both recorded against the same payment.
- A third-party verification stored as a reference and a date, so an external determination of a supplier's status is a fact with provenance rather than a flag somebody set.
- A periodic return over payments made in a period, with the counterparty-by-counterparty figures the filing needs, and a nil version for a period in which nothing was paid.
- A statement to the counterparty on the same period, delivered through the portal, recording that they consented to receive it that way and that the consent still stands.
- A recorded judgement with an author and a date, for a figure that is somebody's conclusion rather than a value read off a document.
Where we point you to a specialist
- We will not tell you whether you are a contractor or a subcontractor within this scheme, or what counts as construction operations. Those definitions live in the Act rather than in the regulations we read, and they catch businesses that would not describe themselves as builders. Your accountants own that determination, and getting it wrong is expensive in a direction software cannot help with.
- We will not compute the materials figure for you, and we would be wary of anyone who offers to. The regulation defines it as the amount you are satisfied represents your subcontractor's own direct cost of materials — a conclusion about another business's costs, which you reach and put your name to. What software should honestly offer is somewhere to record that conclusion, with who reached it and when, so the number on a return has a trail behind it. Deriving it from a supplier invoice line would be inventing evidence, and the invoice does not contain the fact in any case.
The first item is the smallest and it unlocks the rest: a type on a line that survives onto the payment, so a period of payments can be totalled by composition. The second is a column and should have been there from the start. The third and fifth belong together and are a real piece of work rather than a field — a deduction changes what a payment means, so it reaches the register, the order balance and the accounting posting. The last one is the cheapest thing on the list and the one we would most like to build, because a figure with an author and a date is better than the same figure typed into a form once a month.
What we can build for the United Kingdom on top of the standard product
Everything listed above as something we can add describes what ships in the standard product today — it is a starting point for the United Kingdom, not a limit on what AWRA OpsHub can do there. Kenya's eTIMS integration and its maintained payroll engine are in the product because Kenyan clients needed them and commissioned them; neither appeared by itself. The same door is open here. If tax on the purchase side, a nine-box VAT return, transmission to HMRC, a bank or mobile money feed, a statutory return format, a rule specific to how your operation runs, or a link to a system you already have is what stands between you and a decision, tell us and we will scope it as a build — written spec, timeline and price — before you commit to anything.
The three builds, and they only work in this order
Tax on the purchase side first: a rate and a tax type held against a purchase order and an expense, not just an amount, because an amount with no rate cannot tell a recoverable input from a blocked one. Then a VAT return assembled from it — the sales-side boxes are already answerable from data we hold, and it is the input-tax boxes that need the schema change underneath them. Only then transmission through HMRC's interface under Making Tax Digital, with the authorisation and testing that requires. Quoted in that order because the reverse order is how vendors end up with a filing button over figures nobody can trace, and the digital-link rule is precisely a rule about traceability.
Banks and payments
Faster Payments, Bacs direct debits and Open Banking statement feeds wired into the Payments Register, so money in and out reconciles against the documents rather than being re-keyed from a bank screen.
The operational work, which is what most commissions actually are
An extra approval stage in a chain that does not match the standard one, a custom field set on employees or assets that only your sector needs, an expiry that has to block an order rather than send an email, a report your board asks for in a shape nothing produces, or a scanner or weighbridge feeding the goods-in door. These are the commissions we are asked for most often and the smallest ones we quote — and unlike a revenue-authority pipeline, none of them waits on a regulator.
Payroll and statutory returns
A UK payroll engine with PAYE tables, National Insurance, Real Time Information submissions and pension auto-enrolment assessment computed on live employee records. None of it exists today; labour cost attribution to projects and cost centres does.
Systems you already run
The accounting package, CRM, online store or custom database you intend to keep — connected through our API so a fact is entered once and appears everywhere it is needed.
How it works: you describe the requirement, we return a written scope, timeline and cost, and once agreed it is built into your environment and maintained as part of the product. No roadmap slide, and no pretending in a demo that something exists when it does not.
Tell us what you need integratedSee procurement and supplier payments
Purchase orders with itemised lines, every supplier payment in one register with its rail and reference, a supplier portal with logins, and documents attached with every read logged.
Explore procurementFrequently asked questions
Does your system handle the construction industry scheme?
No, and not partially. There is no withholding of any kind on a payment to a supplier anywhere in this product, a purchase order line carries no distinction between labour and materials, and a vendor record holds no tax reference at all. What we do hold is the money: every payment out with its rail, reference, status and the order it settles. Turning a month of those into a return would need the composition on the payment first, which is the smallest item in the buildable list and still a schema change rather than a report.
Why can the materials figure not be taken from the subcontractor's invoice?
Because the regulation does not define it as what they charged you. It defines it as the amount you are satisfied represents the direct cost, to any person other than you, of materials used or to be used on the contract — so it is their cost, and it is your conclusion about it. A subcontractor's invoice tells you what they billed, which may include their margin on the materials, and their own purchase invoices are not documents you hold. It is one of the few requirements we have read where the honest software answer is to record a judgement rather than compute a value.
You verify suppliers already. Is that the same as the verification the scheme requires?
No, and the two are easy to confuse because they share a word. Ours is our own assessment: an application, a reviewer, documents, a score, a validity date and status flags on the vendor. The scheme's is a third party's determination of the subcontractor's registration status, obtained before payment, which changes what must be deducted and — for an unregistered subcontractor — returns a reference that has to appear on the filing. A reference with a date obtained is a different object from a flag somebody set, and only the first has provenance.
Can we email the statement to the subcontractor?
Only on conditions, and they are conditions about records rather than about email. Electronic delivery is permitted where you have indicated you intend to use it, the subcontractor has consented, the consent has not been withdrawn, and the format is one the statement can be stored in and printed from. We have a supplier portal with a login per person, which is a better channel than email in most respects, and we hold no record of consent — so the delivery mechanism is there and the evidence that using it is permitted is not.
Is any of this relevant if we are not in the UK?
The withholding is not; the modelling question is. Several subcontractor withholding regimes carve materials out of the amount subject to deduction, for the same reason — taxing a pass-through cost at source over-withholds. So the question worth asking of any purchasing system is whether a payment can be recorded as being composed of things, with the composition carried onto the payment rather than described in a note. That is a general capability with a specific test, and it is the one we fail.
