My client is an asbestos removal contractor. They are CIS registered as both a contractor and sub-contractor. From now on, I will call them XX Ltd..
XX Ltd have just been granted Gross Payment Status, which will really help them out in terms of cashflow.
My question is this:
I have a heap of sales invoices that have CIS shown on them as a deduction, most of the customers are paying the amount on the invoice. However, one of them paid the gross amount, as they said that HMRC had written to them to inform them that XX Ltd were now gross. The invoices were produced BEFORE we were awarded gross status.
I called HMRC and they say that clients should pay the invoice amount, not the gross. But this particular customer is insisting I am wrong.
I can't imagine that HMRC would expect me to go back over aged invoices that are outstanding and re-issue them and remove the CIS?
I will call HMRC again, but I just wonder if anyone else has had this issue with timing differences?
Thanks
Alison
I am based in Greater London, and own a small business bookkeeping for 25 clients which range from building firms to chiropodists
-- Edited by alpal1971 on Monday 15th of August 2016 08:59:42 AM
Hi
Problem with phoning HMRC is that really it doesn't get you any further, as the customer will still insist you are wrong. Unless they point you in the direction of the manual, have you checked what the CIS guide or better still the manuals say on the matter, as the latter should have detailed info which you can then send to your customer.
No, you should NOT be reissuing invoices.
Your post mentions your client, but then you say 'we have been granted' so a little confusing unless this one is closer to home so to speak. You may want to put the bit under your name on your profile page?
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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
Thank you. I agree calling HMRC won't help too much. The letter that the clients of my client (I say "we" as I feel like I'm part of their staff) says "all future payments made to xxx ltd must be made gross".
I can see why they would think they ignore the CIS on the invoice from that.
I'll call again and keep you posted
I just called HMRC again, and they say that XX Ltd should be paid gross with immediate effect. It is based on payment date NOT invoice issue date.
When I asked what I do with the effectively overpayments from customers, since the invoices show CIS deducted, I was informed that sales invoices should never show the CIS dedicated, at any rate.
He said that a memo box can be added on an invoice showing a suggested calculation, but it is actually up to the customer, to verify XX Ltd on payment date, and pay what the correct tax treatment is at that time. So, reissuing invoices is not effectively an issue, since it shouldn't be on there anyway.
Now this is a HUGE revelation to me! My software, Kashflow, has a button that you press to apply CIS on labour to any sales invoice, at rate you specify.
Anyone else producing sales invoices with CIS applied?
You have complicated matters by putting the CIS deduction on the invoice.
You should just issue the invoice showing net, VAT and gross (I assume that before gross status the invoice showed a breakdown of materials and labour) and it is up to the main contractor to verify you and deduct tax if necessary.
HMRC should write to every contractor on their system who has verified you in the last however many years and the new CIS status should be applied either immediately or from the date on the letter. I get these letters often from various subbies and I too would ignore any CIS deduction calculations on their invoice if I was paying it after the date status changed.
-- Edited by pictures on Monday 15th of August 2016 10:28:58 AM
Now this is a HUGE revelation to me! My software, Kashflow, has a button that you press to apply CIS on labour to any sales invoice, at rate you specify.
Anyone else producing sales invoices with CIS applied?
That's a new one on me Alison. I do Cis for one client, and the invoices I send have no mention of the CIS to be deducted.
However it has highlighted something, how often should you check and a subbies status? My cis guy has 2 subbies working for him, both on 20%. Now it's not going to happen that the status changes for these two, but say he had a ltd co as a subby, and they changed to gross?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
If any subbie who you have previously verified has their status changed then HMRC send you a letter telling you. You then have to manually change their status on the government gateway CIS portal. (the one you use to make your monthly declarations)
The portal will also automatically make you re-verify any subcontractor you originally verified before a certain date. It might be in the last two years. This is relatively new though. I have a job lot of subbies to re-verify at the moment.
-- Edited by pictures on Monday 15th of August 2016 11:24:00 AM
Actually I might be slightly wrong. You only have to re-verify any subbie who you havn't paid in the last two years. All others you will get a letter if their status changes.
Actually I might be slightly wrong. You only have to re-verify any subbie who you havn't paid in the last two years. All others you will get a letter if their status changes.
Thanks Julie, that's good to know.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Now I need to break it to my client that I have been doing this wrong for the last two years...
It's Kashflow who are doing it wrong! I've never used it, but how does it handle the invoice afterwards? Are the sales recorded as the full invoice before deducting CIS (they should be) then the CIS recorded as a debtor? It seems to me Kashflow are trying to be helpful (wrongly) by breaking down the invoice the way they do.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Now this is a HUGE revelation to me! My software, Kashflow, has a button that you press to apply CIS on labour to any sales invoice, at rate you specify.
Anyone else producing sales invoices with CIS applied?
That's a new one on me Alison. I do Cis for one client, and the invoices I send have no mention of the CIS to be deducted.
However it has highlighted something, how often should you check and a subbies status? My cis guy has 2 subbies working for him, both on 20%. Now it's not going to happen that the status changes for these two, but say he had a ltd co as a subby, and they changed to gross?
agree, you shouldn't put CIS deductions on invoices. I see a few do it, but they just effectively are ignored, with a review/payment done, which may or may not agree with what they suggested.
rules re verification HMRC site.
You must also verify subcontractors youve used before if you havent included them on a CIS return in the current or last 2 tax years.
thats two odd things with Kashflow now That I'm aware of.
-- Edited by Cheshire on Tuesday 16th of August 2016 08:51:06 AM
__________________
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
Kashflow have suggested that I click their CIS button AFTER receiving the payment for the invoice. Which makes sense. now they tell you! lol. What is good is that they take the feedback and update the help sections!
They are going to update their help section to reflect this too
Thanks everyone for taking the time to reply.
__________________
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
Hi Sammy
When you say 'issue', I'm assuming you mean just for the sake of the software, rather than actually issue to anyone. Just to get that CIS suffered bit. (A sage-ism, lol!)
Just wanted to clear that one up for anyone who isn't used to this process.
__________________
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
