I have a client who is a locksmith and he also does some kind of sub contracting for a national locksmith firm. If he does a cash job for them he keeps his proportion and sends the rest to them by cheque. Any other jobs he does for them he receives payment less the 20% tax.
I have been scratching my head for a couple of days wondering how best to record it. It sounds incredibly messy to me, do I record the total payment from the job or just the proportion he has recieved for himself, and where do I allocate the payments he has sent to them
Any help would be appreciated.
John
-- Edited by xantia743 on Thursday 23rd of August 2012 12:15:46 PM
Bear with me as I have only just started as a bookkeeper!!
My boss has sub contractors and he has told me that they deduct 20%, which is a CIS Tax.
We post their payment in full, then post a payment to salaries labeled CIS Tax. Then when PAYE is paid, we deduct the CIS amount from the PAYE that is due.
Just to revisit this thread, I don't think I explained myself too well the first time. I now have some paperwork from the locksmith concerned which helps me understand it a bit better.
My client is a ltd company supplying locksmith services to the public, no problem there. In addition he also does sub contracting work for a national locksmith. If he is paid in cash he is allowed to keep half (less the VAT and CIS) and pay the rest to the national locksmith. The client is in his first year and has not hit the VAT threshold yet.
So customer pays £184.80. He keeps £61.60 and pays the remainder to the locksmith. Normally he would invoice the locksmith £77 and receive £61.60
He has tp pay into the bank £184.80 so he can send a cheque to the locksmith which is surely going to inflate his sales turnover.. I am thinking of recording the sale in full, then recording the payment of £123.20 as -£107.80 against sales and £15.40 to CIS tax. Would this be the correct way to do it?
