Please could someone explain how I deal with a sales invoice payment from a contractor who has deducted 20% under CIS, my client is VAT registered. I use VT Transaction +.
What work does your client perform, is it work falling under the Construction Industry Scheme and is he registered as a sub-contractor? I assume you are querying it because he did not deduct CIS on the invoice raised?
My client is a plumbing and heating engineer and yes he is registered as a sub-contractor. No, CIS deduction was not shown on the invoice how can this be amended in the vt accounts?
Hi Jill Your client should get a document from the contractor showing what has been deducted, for his records. Bit like a payslip.
Ive only just started using VT so cannot comment specifically, but if I was using Sage, I would raise a dummy credit note and code is to the CIS suffered account. Would that work?
There are a few peeps on here who use VT though so I would hang fire for a couple of days and you might get a more sensible response
-- Edited by Cheshire on Friday 1st of April 2016 08:42:16 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Agree with getting a tax certificate. The CIS tax is an advance payment of the client's income tax.
I do not agree that the entry should go to sales. The gross invoice should be included in sales since the gross amount is included in taxable income (I mean gross of CIS but net of VAT). The other side of the entry should go to a balance sheet account, either HMRC tax debtor or, since for a sole trader the tax is borne by him and not by the business, as a debit in his current account or his drawings.
Sorry I do not use VT for sole trader subbies so others may need to advise on the bookings.
hi Hannah.
Just to clarify, I wasn't suggesting the entry go to sales, I didn't say that, but that the code be changed to CIS suffered. That account code can be HMRC tax debtor or drawings section or wherever as appropriate, but at least keeps all the amounts in one account until the year end when it can be further manoeuvred as required. Again, to clarify, the dummy credit note can carry whatever account code is required (well it can in sage) and is just a way of keeping the customer account clear, otherwise the will always be a shortfall with payments v. Invoices.
I had a similar scenario recently on VT with letting agency invoices, where they contain both income and costs. I tried the dummy route (similar to the above) in vt and it worked. The main thing in that scenario is to keep the 'dummy' element away from sales. I also tried the setting it up as a supplier and customer invoice and using a neat contra option they have. Both did exactly the same, it horses for courses.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I use Vt occasionally but not an expert. I set up a bank account 'cis suffered'. I post the actual value of receipt from the customer to the invoice via the usual bank account and the 20% deduction as paid into the 'cis suffered' account. At the end of the year I move it all into drawings/capital. Assuming sole trader rather than Ltd
HTH
-- Edited by annepebo on Friday 1st of April 2016 09:25:36 PM
Joanne
Thanks for your reply, I get it now. I would normally do journals and did not know that you could do a credit note to an account without affecting sales and VAT.
Jill
I had a look on VT and if you use Joanne's method I think you would use the SCR button and choose Analysis Ledger and Analysis Account. I would probably put it to Capital-Drawings since I would not want income tax to be on the BS of a sole trader. But you could set up a Debtor account called CIS and move it at the end of the year as Joanne suggests to track it separately.
I have only ever seen one subbie do that. I would say not - as its up to the contractor to verify your client as a subbie and obtain the rate to be deducted via the verification process, from HMRC. That said - you should check the amount they are deducting is what your client is expecting and make sure they get their maths right - not always the case when there are materials and VAT involved. Also you/your client must ensure you get the relevant certificates.
I agree with Joanne. I do admin work for one of my clients and I have never shown the CIS deduction on invoices sent. It is for the contractor to determine the rate of deduction based on HMRC verification.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
