Can you claim what you pay subcontractors as a freelancer? Hiring other freelancers for client work, contract labor, staff costs, employee or contractor, construction and where it goes under the IRS, HMRC and CRA rules (US, UK, Canada)

A designer who brings in an illustrator, a developer who hands part of a project to another developer, a writer who pays an editor: sooner or later many freelancers pay someone else to help with the work. Here's what the IRS, HMRC and the CRA say about claiming those payments, which line or box each country uses, the forms that can come with them, and the special rules for construction.

General information, not tax, legal or accounting advice. Not written or reviewed by a lawyer or an accountant. The short answer, the side-by-side summary, the steps, the checklist, the wording to copy and all the other wording are ours; the official items come from the US, UK and Canadian government pages linked below. This page is about a self-employed person (a sole proprietor or sole trader) paying another self-employed person or business for work in their business. It doesn't tell you whether someone is an employee or a contractor, what share of a mixed cost is business, or which line or box applies to you, and it doesn't cover payroll and employees, the construction schemes in detail, paying contractors in other countries, partnerships or companies, VAT, GST/HST or sales tax, US states, Canadian provinces, Quebec, or other countries. Employment status, Form W-9 and Form 1099-NEC are in our separate guides. Rules change; check the current official pages before you claim. Official pages were read on 2026-10-21.

The short answer

1. US: the Schedule C instructions say, under Line 11, "Enter the total cost of contract labor for the tax year. Contract labor includes payments to persons you do not treat as employees (for example, independent contractors) for services performed for your trade or business." You may also have forms to file for the people you pay; see sections one and two.
2. UK: GOV.UK lists "staff costs, for example salaries or subcontractor costs" among the costs you can claim, and the return notes put subcontract labour in the staff costs box; construction has its own box and scheme. See sections three and four.
3. Canada: the CRA says "Generally, you can deduct any reasonable current expense you incur to earn business income." Its subcontracts line is only in the cost of goods sold part, so the line for help with services is our reading; see sections five and six.
4. Employee or contractor? The IRS and GOV.UK both warn about treating someone who should be an employee as a contractor. Our employee or contractor guide covers the tests; this page doesn't repeat them.

On this page

• 1. United States: the contract labor line
• 2. United States: forms for the people you pay
• 3. United Kingdom: staff costs and subcontractors
• 4. United Kingdom: construction work
• 5. Canada: the general rule and the salaries line
• 6. Canada: subcontracts and construction
• 7. Side by side
• 8. Step by step
• 9. Wording to copy
• 10. Checklist
• Free tools and kits
• Where the sources differ
• When to get advice
• Related
• Sources

1. United States: the contract labor line

• The general rule: "To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business."
• Business and personal: "If you have an expense that is partly for business and partly personal, separate the personal part from the business part. The personal part is generally not deductible."
• Employment Taxes: "An independent contractor is someone who is self-employed. You generally do not have to withhold or pay any taxes on payments made to an independent contractor." "If you incorrectly classify an employee as an independent contractor, you may be held liable for employment taxes for that worker plus a penalty." (IRS: Publication 334 (2025), Tax Guide for Small Business, page date 30-Apr-2026).
• Line 11: "Enter the total cost of contract labor for the tax year. Contract labor includes payments to persons you do not treat as employees (for example, independent contractors) for services performed for your trade or business." "Do not include contract labor deducted elsewhere on your return, such as contract labor includible on line 17, 21, 26, or 37. Also, do not include salaries and wages paid to your employees; instead, see Line 26, later." (IRS: Instructions for Schedule C (Form 1040) (2025), page date 30-Apr-2026).

Fees for an accountant or a lawyer go on a different line; they're in our professional fees guide. Paying a family member is in our guide to paying family members, and the other expense lines are in the expense categories of our Schedule C guide.

2. United States: forms for the people you pay

• Before you pay: "If you've made the determination that the person you're paying is an independent contractor, the first step is to have the contractor complete Form W-9, Request for Taxpayer Identification Number and Certification."
• After the year: "You must use Form 1099-NEC, Nonemployee Compensation, to report payments made during the tax year totaling or exceeding the reportable payment threshold amount to persons not treated as employees (for example, independent contractors) for services performed for your trade or business."
• If you're a contractor yourself: "Also note that independent contractors may have their own employees or may hire other independent contractors (subcontractors). In either case, they should be aware of their tax responsibilities, including filing and reporting requirements, for these workers." (IRS: Forms and associated taxes for independent contractors, page date 11-Sep-2026).

The amount that triggers a Form 1099-NEC, the dates and how to file are in the payer section of our Form 1099-NEC guide, and the form you ask for first is in our Form W-9 guide; they aren't repeated here.

3. United Kingdom: staff costs and subcontractors

• The overview: "If you’re self-employed, you can only claim for costs related to business purchases, including:" The list includes "staff costs, for example salaries or subcontractor costs" (GOV.UK: Expenses if you're self-employed, page date 2024-11-08).
• Staff expenses: "If you’re self-employed - a sole trader or individual in a business partnership - you can claim allowable business expenses for costs such as:"
  • employee and staff salaries
  • bonuses
  • pensions
  • benefits
  • agency fees
  • subcontractors
  • employer’s National Insurance
  • training courses related to your business
  "You cannot claim for carers or domestic help, for example nannies." (GOV.UK: Expenses if you're self-employed, staff expenses, page date 2024-11-08).
• The box: the notes for the full self-employment pages say, under Box 19 Wages, salaries and other staff costs, "This includes salaries, wages, bonuses, pensions, benefits for employees, agency fees, subcontract labour costs (not included elsewhere), and employer’s NICs. Do not include payments to yourself, your own pension payments or NICs." (HMRC: Self-employment (full) notes, Tax year 6 April 2025 to 5 April 2026 (2025–26), PDF).

If you use the short pages or give one total for expenses, the boxes are different; our UK Self Assessment guide shows the expense boxes on both versions. Whether someone is self-employed or should be your employee is in the UK part of our employee or contractor guide.

4. United Kingdom: construction work

• Box 18 Construction industry: "This includes the total payments you made to subcontractors or any person or company for any type of construction work." "If you take on subcontractors in the construction industry you may need to register as a contractor in the Construction Industry Scheme (CIS)." (HMRC: Self-employment (full) notes, Tax year 6 April 2025 to 5 April 2026 (2025–26), PDF).
• The scheme: "You must register as a contractor with the Construction Industry Scheme (CIS) if:"
  • you pay subcontractors to do construction work
  The page lists one more case, for businesses that don't do construction work but spend a large amount on it. "You must check if you should employ the person instead of subcontracting the work. You may get a penalty if they should be an employee instead." (GOV.UK: What you must do as a Construction Industry Scheme (CIS) contractor, page date 2015-06-22).

The scheme has its own registration, deductions, returns and records; read them on GOV.UK before you take on a construction subcontractor. This page doesn't go further.

5. Canada: the general rule and the salaries line

• The general rule: "Generally, you can deduct any reasonable current expense you incur to earn business income." "However, since you cannot deduct personal expenses, enter only the business part of expenses on the Form T2125, Statement of Business or Professional Activities." (CRA: Expenses section of Form T2125, page date 2026-08-31).
• Employees: "You can deduct gross salaries and other benefits you pay to employees." "Do not include:"
  • salaries and wages such as direct wage costs or subcontracts
  • drawings of the owners of the business described at Line 9932 – Drawings in the current year
  • salaries or drawings of the owners of the business since salaries or drawings paid or payable to you or your partners are not deductible
  (CRA: Line 9060 – Salaries, wages, and benefits (including employer's contributions), page date 2026-08-31).

Whether someone you pay is an employee or self-employed is in the Canadian part of our employee or contractor guide, and the other expense lines in the expenses section of our guide for Canadian freelancers.

6. Canada: subcontracts and construction

• Part 3D – Cost of goods sold and gross profit: "Fill in this part if you have a business and your business buys goods for resale or makes goods for sale."
• Line 8360 – Subcontracts: "Enter all the costs to hire outside help to perform tasks related to the goods you sell." (CRA: Guide Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 2 – Income, page date 2026-04-16).
• Line 9270 – Other expenses: "Enter on this line the total of other expenses you incurred to earn income, as long as you did not include them on a previous line. You have to list these expenses on the form." (CRA: Guide Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses, page date 2026-04-16).
• Construction: "The T5018 reporting requirement is part of the CRA's effort to promote compliance in the construction industry and to reduce activity in the underground economy." The page lists when a business must issue the slip; read the conditions there (CRA: T5018 slip – Statement of contract payments, page date 2025-07-03).

Which line to use for help with the services you sell is in "Where the sources differ".

7. Side by side

Our summary of sections one to six, not official wording.

8. Step by step

Our order of steps, based on sections one to six — not an official checklist.

1. Before the work starts, check whether the person is working for you as a contractor or would really be an employee.
2. Agree the job, the price and how you’ll be invoiced, in writing.
3. In the US, ask the contractor for the IRS taxpayer identification form before you pay, and keep it.
4. Keep every invoice from the contractor and a record of each payment you make.
5. Note what the work was for, so you can show it was part of your business.
6. Keep payments for anything personal, such as help at home, out of your business records.
7. At the year end, add up what you paid each contractor and check whether you have a form to file for them.
8. Put the total on the line or box that fits the work, and use the same approach each year.
9. If the work is construction, read the special rules for your country before you pay.
10. Ask the tax office or an adviser if the status of a worker or the right line is unclear.

9. Wording to copy

Fill in everything in [brackets]. This is ours, not from any agency, and it's not tax, legal or accounting advice. It doesn't take the place of the invoices, forms and records your tax office may ask for.

A record for each contractor payment

Contractor payment record (my own records, not an official document)
Tax year: [year or period]
Contractor: [name or business name]
Where they're based: [country]
Status checked: [yes, as a contractor, on: date / not yet]
US taxpayer identification form on file: [yes / not needed / not sure]
What the work was for: [client project or part of the business]
Construction work: [no / yes, special rules read]
Invoice number and date: [number, date]
Amount paid: [amount]
Date paid and how: [date, method]
Business or mixed: [business only / mixed, business part worked out as: method]
Line or box used: [line or box]
Invoice kept at: [where]

A request to a contractor for an invoice

Hi [contractor name],

Thanks for your work on [project]. Could you send an invoice for it showing your name or business name, your address, the date, a short description of the work and the amount?

[If you're in the US: could you also fill in the IRS Request for Taxpayer Identification Number and Certification for my records before I pay?]

That way my records match the work done. Thanks,
[your name]

10. Checklist

Our summary of the official pages above, not an official checklist.

• Employee or contractor status checked before the work started
• A written agreement or quote for each job
• The taxpayer identification form on file for each US contractor
• An invoice and a payment record for each payment
• What the work was for, noted
• Personal help kept out
• Yearly total per contractor, and any form to file for them
• The line or box you used on your return
• Construction rules read, if the work was construction
• Anything you’re not sure about, checked with the tax office or an adviser

Free tools and kits

• Our free expense tracking guide shows a simple way to keep business cost records.
• Our free expense and receipt log keeps the details for each bill.
• Our paid Freelance Billing Kit by Small Rows (US$12, one-time) can log each payment to a contractor: the Expenses tab has a date, a category, a description, the amount paid and a "Deductible? (your call)" column, and the category drop-down lets you pick the contract labor line from the US list, or the wages, salaries and other staff costs box or the construction industry payments to subcontractors box from the UK list, or Other from the kit's own list, or type your own. Each row counts in full in the year of its date. It doesn't decide whether someone is an employee or a contractor, collect tax forms from contractors, file information returns or scheme returns, pick the line or box for you or file anything.
• All three kits together: the All-Kits Bundle by Small Rows (US$24, one-time).

Where the sources differ

• Which Canadian line for help with services: the CRA's guide names a subcontracts line only in the cost of goods sold part, for outside help with the goods you sell, and its salaries line leaves subcontracts out; the pages we read don't say where a freelancer who sells services puts payments to a subcontractor. Our reading is that the general rule still lets you deduct them, on the expense line that fits the work or as other expenses listed on the form, and that you should check with the CRA or an adviser before you settle on a line.
• The US reporting amount: the contract labor line in the Schedule C instructions for the latest tax year gives a Form 1099-NEC amount for that year, while the IRS contractors page speaks only of the reportable payment threshold, and the amount changed for later payments. Our reading is that the amount depends on the year you paid; our Form 1099-NEC guide tracks the change, so we don't repeat a figure here.
• Which UK box: the return notes put subcontract labour in the staff costs box when it isn't included elsewhere, and construction subcontractors in their own box. Our reading is that a freelancer outside construction uses the staff costs box, and a payment that belongs in another box, such as professional fees, goes there instead.
• Adviser or helper: the US contract labor line leaves out contract labor that belongs on other lines, such as legal and professional services. Our reading is that an accountant or a lawyer advising your business is a professional fee in all three countries, while someone doing part of the client work is a subcontractor; our professional fees guide covers the first.
• Employee or contractor: the IRS publication and GOV.UK's construction scheme page warn of employment taxes or a penalty if someone should have been an employee, and the CRA's salaries line keeps employees and subcontracts apart; the IRS publication gives a one-line general rule and points to a separate publication, and the other pages we read for this guide don't give the tests. Our reading is that the label in your agreement doesn't decide it; our employee or contractor guide covers each country's tests.
• Page dates and editions: the IRS publication and instructions are the editions for the latest tax year and the CRA guide was updated this year, but GOV.UK's expenses pages and construction scheme page carry older page dates. Our reading is that the rules above are current, but check the live pages and later editions before you file.
• What we did not check: payroll, wages and employees; the construction schemes beyond the pages above, including deductions and returns; information slips other than those named here; paying contractors in other countries, including US withholding on payments to non-US people; agency workers and umbrella companies; off-payroll working rules; partnerships and companies; the short self-employment pages line by line; VAT, GST/HST and sales tax; US state rules; Quebec and provincial rules; other countries' rules.

When to get advice

• someone works only for you, on your hours, with your tools, and you're not sure they're a contractor;
• the work is construction, or you may need to register for a construction scheme;
• the contractor lives or is based in another country;
• you pay a family member, or someone also works for you as an employee;
• you're not sure which line or box a payment belongs on;
• you have a partner or a company, or you're registered for VAT, GST/HST or sales tax.

Talk to an accountant or a tax adviser in your country. This page is general information only.

Related

• Employee or contractor?
• Form 1099-NEC for US freelancers
• Form W-9 for US freelancers
• Accountant, legal and professional fees
• Paying family members
• Freelance expense tracking
• Schedule C for US freelancers
• UK Self Assessment for freelancers
• Canadian self-employment statement for freelancers

Sources

• United States: IRS: Publication 334 (2025), Tax Guide for Small Business, page date 30-Apr-2026 · IRS: Instructions for Schedule C (Form 1040) (2025), page date 30-Apr-2026 · IRS: Forms and associated taxes for independent contractors, page date 11-Sep-2026
• United Kingdom: GOV.UK: Expenses if you're self-employed, page date 2024-11-08 · GOV.UK: Expenses if you're self-employed, staff expenses, page date 2024-11-08 · HMRC: Self-employment (full) notes (Tax year 6 April 2025 to 5 April 2026 (2025–26), PDF) · GOV.UK: What you must do as a Construction Industry Scheme (CIS) contractor, page date 2015-06-22
• Canada: CRA: Expenses section of Form T2125, page date 2026-08-31 · CRA: Line 9060 – Salaries, wages, and benefits (including employer's contributions), page date 2026-08-31 · CRA: Guide Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 2 – Income, page date 2026-04-16 · CRA: Guide Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses, page date 2026-04-16 · CRA: T5018 slip – Statement of contract payments, page date 2025-07-03

Checked 2026-10-21. Found a mistake? Tell us via Support.