I am new here,and hoping to find answers to some questions that i might have.
My friend works as a self employed builder and he is registered with CIS.The contractor deducts 20% .
When doing profit and loss account for the year i treat gross amount on the invoices as a turnover,however were do i put 20% deducted by contractor?Is it cost of sales?
The £20 deducted at source goes to drawings as to put to cost of sales wouldnt be right as it isnt a cost it is just a payment on account towards the final tax liablity.
When the tax return is done and the tax liabilty is worked out the amounts deducted by the contractor are of course deducted from the tax liablity as they are payments on account that have been made by the contractor, on behalf of the subbie.
so far I haven't been asked to do a p and l, their just given me the job sheets and expenses and purchases receipts and I've just tallyed them up and entered on to se tax return.
But this is interesting to know if I do need to in the future.
-- Edited by lor on Friday 17th of August 2012 10:01:31 AM
I would put the amount to a sub account of the drawings account, called something like CIS deductions suffered, simply because he will then be able to see at a glance how much he has paid in tax, which might be useful to know.
