Hello, can anyone help me please, I have started at a new company who have been doing their CIS returns manually and for one sub-contractor they have been wrong for this tax year because of the VAT on their invoices and they have been making lots of part payments on them as well. I have a figure paid to the subbie of £9,500, how do I net it back to the gross paid excluding vat? I undertand there is a formula but have been trying so hard to work it out that I now decided to join this forum for some help. Many thanks.
I've not got any CIS clients but this seems more about VAT than CIS.
To remove the VAT from a figure you need to multiply by 1 and divide by 6, or just divide by 6.
For example, £9500 / 6 = £1583.333.
£9500 - £1583.333 = £7916.667 paid excluding VAT.
To check that the value is correct, take £7,916.667 and multiply by 1.2 which gives you £9500.
The reason behind the multiply by 1 divide by 6 is historical as at 17.5% VAT the calculation is multiply by 7, divide by 47 so it's just an adaptation along the same lines.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi, the VAT is calculated on the gross amount of Labour and materials for CIS, so it not based on the £9500, which is the net figure paid to the sub-contractor with the 20% tax deducted. I know how to take net off vat on a normal invoice, but when it is CIS it is different. I am trying to work out what the labour and materials would be and I cannot refer back to invoices because they have made part payments, so now I need to work out the monthly statements to the subbie correctly and also the monthly return.
I don't see how there can be a formula as the labour and materials are varying amounts. One payment could have a large item of material included in it which doesn't include much labour to fix whereas another payment may be for a labour intensive activity with little materials involved.
At some point the contractor is going to have to show a statement showing how they have calculated the tax deducted (even if it was calculated wrongly). So if there is a final statement then the interim payments must be fractions of that final statement. That is the theory. The practice is completely different. But at some point there must be a breakdown of the labour element and the materials.
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I have worked the statement out as a total from the 6th April 2011 for labour, materials, vat and tax deducted and it is correct. We have deducted the correct tax overall, but that problem is each monthly statement whoever was doing it did not know how to work out the gross amount (just like I dont now!) and were notifying HMRC and the sub-contractor the wrong amounts on the statement. The reason for the confusion is that only part payments were made against the invoices and were allocated incorrectly on Sage.
So I am trying to work back from the amounts paid to the subbie, so I can make the statement correct and notify HMRC accordingly. Thought there was a formula, but maybe I am wrong. Do you know if I can just notify HMRC of the year to date figures so far and also do a statement to the subbie for dates so far as well, whether this is acceptable?
