Your client I am guessing has had the 20% CIS tax deducted from the labour only element of his invoice.
The 20% doesn't get deducted from any materials he charges for.
Whilst he is working for this and other clients within the construction industry he will have this 20% deducted from all of his invoices and shortly after the 5th of each month he will be sent a statement (HMRC From CISOL1 I think) by these clients outlining how much they have paid him (gross) how much tax they have deducted (CIS) and how much they have paid him (net). This tax deducted by his clients must be paid over by them to HMRC by 22nd each month (just as you would paye/nic). It is vital that he or you keep these statements as they will be used at the end of the tax year to help you caluclate how much CIS tax he has had deducted and this amount will get entered on his self assessment return. This tax is tax paid on his behalf by his clients to HMRC.
Last year I was self employed for half of the year. My contractors were taking the 20% from my labour for the CIS tax. I have all the statements. Now I am trying to close my books. I know I have to add the total that was taking from me to the tax return.
I was entering the CIS discounted amounts like it follows:
Dr Bank
Dr Proprietors Drawings Account
Cr Sales/Services
What I am not sure of it's what do I do with the Proprietors Drawings Account at the end of the year. Do I need to close this account and leave a 0 balance? What do I set it against?
Drawings ac balances get transfered to the profit and loss ac at the end of the yr to make them zero, same as expense accounts, for self employed. It's slightly different for a Ltd co
