Subcontractor

What it means

A subcontractor is your supplier’s supplier: part of what you contracted for is performed by someone else. Contractually your partner remains responsible, but in fact the outcome depends on a chain you cannot see.

That is the risk. Quality, deadlines, data protection and sanctions compliance carry only as far as they are carried contractually - which has to be agreed explicitly.

A subcontractor delivers a result and decides for itself how to achieve it. If its people work to your instructions, in your working hours and with your equipment, it is closer to dependent work or agency employment. The line is not a formality: it decides whether the relationship is commercial or an employment one with all the obligations that brings.

How it works in practice

The contract sets whether subcontracting is permitted, whether consent is needed, and which obligations pass down: the SLA, confidentiality under the NDA, and for personal data a data processing agreement.

For critical supplies, the supplier audit asks who actually does the work and where. With outsourced accounting that means knowing who can reach your documents.

Chains of subcontractors are common in construction, and between VAT payers construction work falls under the reverse charge. On subcontractors’ invoices to our clients we therefore check that they carry no VAT, have the correct wording and that the customer has self-assessed the tax, so no VAT is deducted that the supplier should never have charged.

What to watch out for

An undisclosed subcontractor in another country is a problem for GDPR and for service continuity alike. And if the subcontractor fails, you deal with your own contracting party - you usually have no direct claim against them.

If at the time of supply a subcontractor is on the list of payers with grounds for deregistration and fails to pay the tax, the tax authority can collect it from you. This liability for tax can be spotted in advance with one look at the list, so for new and cheap subcontractors we check it before the first payment.