I need to post a subcontractors invoice to Sage Line 50 taking into account the 20% which will be paid to HMRC.
I have been paying CIS Subcontractors for years, we use to have the Sage CIS programme which automatically did this however I now need to do it manually as I have started a new company who unfortunatley only have the original Sage Line 50 programme.
Do I post the invoice in full to the subcontractor account then post a credit note to the same account to show the tax being deducted?
If I do this do I then need to post a dummy invoice to the hmrc account with the tax control nominal code which the hmrc payment can be allocated against?
If not is there another way this should be done?
Please help I am going crazy trying to figure it out
Yes you are right, but where the gross amount of the invoice needs to be charged to SubContractors (probably somewhere in the 6000 numbers), the credit note needs to go to a Balance Sheet Control account, either a separate one called Sub-Contractor Tax (which will be very near where you post TAX/NI due - 2210 or thereabouts) or into that actual account (I prefer to keep them separate). The credit note needs to be T9 as it's outside the scope of VAT. Then, when you make the payment to HMRC the SubContractor Tax portion of it can be posted to the relevant Control Account thereby bringing it to Nil (hopefully!) Obviously, when you pay the Subbie the net amount you use the credit note to net the tax against the Gross Invoice.
Hope I've explained that properly - you were nearly there, you just had an extra step!
Yes that's perfect, except that I always post invoices from non-VAT registered suppliers as T0, but don't get hung up about that because there has been scad loads of discussion about it and there are numerous ways of interpreting HMRC rules, so people do it differently.
In any case the credit note to the Sub-Contractor tax account (2210 in your example) is definitely T9.
I might be over thinking but I just thought if I post the credit to 2210 the balance will be £200 in credit then when I post the payment will it not show £400 in credit?
How will I then get this to show a 0 balance as I wont have an invoice from HMRC?
No, when you enter the cheque or other payment to HMRC as a Bank payment, you will specify 2210 as the nominal code, and it will debit 2210 and credit Bank (thereby reducing your Bank balance). This will then bring 2210 to zero.
