Please can someone explain how I deal with the following issues:
My main customer who I do lots of subcontract work for never issues me with CIS monthly statements. All of the invoices I send them usually are a mixture of mainly labour and some materials.
Here's an example of one of my invoices;
Labour 4,500
Materials 1,000
Net Total 5,500
VAT 1,100
Total £6,600
I would expect from the above invoice a payment of £5,700.
More often than not the customer sends about half now and the remainder next month. He references it as part payment of invoice number or payment on account if there are a few invoices outstanding.
How should I allocate a part payment/payment on account in Sage? (I don't have the CIS module)
If he had of paid £5,700 I enter it as the full invoice amount being paid in the customers account then I do a bank payment for the CIS suffered to the CIS account but how do I enter a part payment in sage and how do I know whether the part payment is minus CIS or not? I can't tell HMRC what CIS tax I have suffered each month if Idon't know!
Hope someone can help me solve this, expecially how I should enter these payments into Sage.
Thank you :)
Dean
-- Edited by parrott on Sunday 18th of September 2016 10:16:27 PM
You are correct I should have signed off as Maxine and I mistakingly signed off as Dean. Dean is the subcontractor I am talking about.
As I do not have the CIS module Sage have advised me to process it this way. If you check the Sage articles on this subject you will find that the way I am processing the customer payments is correct!. I am not disputing this. I am also not asking if it is wrong that the customer does not provide CIS statements, as obviously I know it is.
What do you mean "Plus if you are only processing the payment to CIS as it's paid out, how are you showing the liability?"
Let me explain...
Firstly a company does not "pay out" the CIS tax that it has suffered. I raise an invoice to the customer, customer pays the invoice minus 20% Tax, I clear the invoice as paid in the customers account (as advised by Sage) even though in reality the customer did not really pay the full invoice amount. I then do a bank payment of £900 (the CIS tax that I have suffered) this corrects my bank account and updates the CIS balance sheet nominal account (3000) with monies owed to the company!
Your question "Plus why if you have an invoice at £6.6k would you show it as fully paid at £5.7k? What happens to the rest of the balance on the SLCA?"
My answer "the whole invoice amount is shown on the SLCA because this account is an asset and assets are monies received and monies owed to the company"
Obviously the main contractor should be supplying CIS statements and obviously both myself and Dean have asked them on numerous occasions but this is not what the topic was suppose to be about.
Not sure if I have failed to explain my problem clearly or you just misunderstood?!
If anyone can advise me of the best/accurate way to record a customer part payment of the above invoice with no CIS statement that would be great. If not, then I will probably just leave it as a Payment on account!
Hello Maxine It's Joanne btw, not Cheshire (my name is at the bottom of my post).
Oops, the comment 'if you are processing the CIS as it's paid out' was badly phrased by me, I switched from thinking about subbies to main contractors whilst trying to get my thoughts down, not helped by the general confusion on your original post when I read that you 'do a bank payment for the CIS'
I was trying to get to the bottom of how you process it now as the whole thing seemed wrong to the way I have done it via using sage for a good few years. There is no point me talking about the way to do it, if all the rest is wrong or done in some other convoluted way and I introduce a different way that you don't get.
But yes your whole post was confusing, not least signing off as someone else ( gave me a giggle though), but also as you seemed to be writing as if you were the business owner/subcontractor yourself (your first sentence).
I know how the SLCA account works and CIS , by the way, but my question was about the balancing CIS element, although you have now sort of answered in part, although I still view you are doing this in an odd way. You suggested if I view the sage articles then you will see, well of course I had done that when I originally started doing sage but I have also, as you suggested checked it again and cannot see anywhere in the articles the way you are processing this as being like they suggest.
But on the basis I have no idea what version of sage you are using I could be looking at completely the wrong article, so perhaps you could provide a link to the sage article you are referring to, as well as advise us which sage type and version year.
Also, I thought 3000 is usually a share capital nominal, although I'm not at sage just now to check that out, so wondering why you are parking the CIS suffered there and which is your share cap account. In fact, might also help to know the status of your business.
-- Edited by Cheshire on Monday 19th of September 2016 08:42:27 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
As Joanne says, you definitely need those CIS payment sheets from the contractor. By law they must send that no later than the 19th of the month, which will include payments up to 5th. Without it is impossible to know how the contractor has recorded the CIS on his monthly return. It might also be worth checking with CIS to see if monthly returns are being made for Dean, as it will be a shock further down the line if the contractor hasn't been.
Joanne is handling the sage questions, (and she knows sage really well, whereas I don't) and her advice is sound. Even to me, the handling of the CIS is wrong, so it may be worth revisiting that, with Joanne's help.
-- Edited by Leger on Monday 19th of September 2016 01:50:15 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
When we make a payment to a sub-contractor we post a credit, nominal code 2210 & T9, to their account for the CIS amount. We then provide them with a remittance advice that will show the invoice paid and the credit for CIS. If we were to part pay an invoice we would do it in a couple of ways. If, going by your figures at the top of the page, we decided to only pay £1000 towards the invoice, we would just use this payment against the materials element, thus not taking any CIS deductions. We know the total deductions on the whole invoice are £900, so we would then deduct £900 off the balance payment, which would then be £4,700.
Sometime we pay half an invoice just to keep a subbie happy for a couple of weeks, which in this case would be £3,300 and, because this is more than the materials cost, we would take 1/2 the CIS tax, so deduct £450, meaning payment is £2850. However we will always show it on the remittance with an explanation of the deductions made, as long as once the invoice is paid, we have deducted £900 in total. We also do provide statements every month showing all deductions made for the month though.
Hi Sammy If you are paying half if the invoice are you then including the materials in the first batch of the payment, because if so your CIS calculation and reporting is incorrect. The CIS has to be apportioned and reported within the month it was paid. So if you take the materials as being paid in the first invoice payment the CIS deduction will be less than when you pay the second half of the invoice.
Unless I have lost the plot! Which is entirely possible
-- Edited by Cheshire on Friday 30th of September 2016 11:09:19 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
As long as the CIS calculation is correct and reported when we pay it? Yes it is always reported in the month we pay it. Sometimes we will pay the materials portion of the full invoice earlier because the materials arrive on site and the subbie will want to be reimbursed for it sooner, but generally the labour part gets paid a week later and all within the same month anyway, so when it comes to reporting, it makes no difference.
