I have a couple of clients subject to CIS as contractors as well as sub-contractors. I'll tell you how we record it in Sage for sub-contractors - it can be adapted for any bookkeeping/accounting software:
1. Post the gross amount of the invoice to the sales ledger
2. Post a credit note to the sales ledger for the CIS tax deducted (use a nominal code which corresponds to the balance sheet - I use 2230 in Sage).
At the end of the tax year/accounting period, you can then report how much CIS tax has been suffered.
An alternative way of recording the CIS suffered is to record the 'actual' payment received (which will be 20% less than the invoice) in the normal way, then receive the remaining amount to a specifically set up current asset account. This keeps a track of the CIS suffered that can go on the self assessment of a sole trader.
If your client is a limited company that has employees - CIS suffered can be offset against Tax and NI deducted that has to be paid to HMRC.
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Carol Saunders Lady of Ledger Book Keeping Telford, Shropshire
