The timing of recording CIS Deductions

Barker

Hi Guys

I have a query about the time at which it is appropriate to record the CIS deductions you retain from subbies and those you suffer.

Our accountants send our accounts back showing the debtors figure less the total CIS deductions due on all invoices for that year. However, i was only recording them when payment was made which i thought was prudent - we may end up writing that invoice off so never actually pay tax on it. ?

However, if we would like to see in our sales ledger the amount that we will actually receive, we could post the credit notes for the CIS element at the same time we post the invoice? Is it standard that accountants assume all CIS is paid on invoices rendered during the year?

What do other people do?

As for those we retain from subbies - i only record those when we actually pay them, as opposed to entering the credit note for the CIS at the same time as their invoice.

Which is correct practice - to record at the same time so you know which is due, or to record when payments are made/received?

Help?!

blobbyh

Barker wrote: »

subbies... and those you suffer

Never a truer word was spoken...

Not sure I completely understand your post but as to your last question, I only pay the CIS tax for the subbie in the PAYE month I actually make the payment.

For example, Bloggs & Sons gave us an invoice on 27th November 2007 for £100 labour with no materials and a 20% deduction i.e. £20 CIS tax due and 7 days credit. However, being the tight git I am, I didn't actually pay him until 10th December, meaning I wouldn't pay his £20 tax over to the Revenue until 19th January 2008 seeing as I fortunately made him miss the lot due for 19/12/07.

Likewise for payments we receive - we can't claim back the CIS tax until the invoice has been paid less the tax.

My limited understanding is that while the invoice in this case is accounted for under the accruals concept (i.e. the invoice was raised on 27/11 thus setting the VAT date but will probably be settled sometime in the future), all CIS/PAYE tax payments/receipts are based on cash accounting (when the payments/receipts are actually made) but please correct me if I'm wrong!

JodieR

I use quickbooks and enter a negative line on each invoice (sales and purchase invoices) for any CIS. The reason behind it is more practical than anything else - that way I know what cash the client is due in/out in respect of the invoice. well, that's the way I MEAN for it to happen, these are subbies we're talking about!!

Barker

Jodie - thats what i started doing. Entering the invoice and then a credit note for the CIS element. Which is all fine for knowing what you're owed, but then how does your CIS retained/suffered nominal represent what you actually have to pay to HMRC?

I think blobbyh is actually right - it must be based on cash accounting.

It just struck me as strange that the accountants adjusted the debtors figure by the amount of CIS due on all unpaid invoices at year end - they assumed we would get tax paid on all of them, which we actually didn't in the end, one got written off. Its just with them doing that, i wondered whether i should be accounting for it straight away as opposed to when payment was received. :confused1:

JodieR

Your CIS account shows the total that will eventually be paid to HMRC. Each month I go through each entry and see whether the corresponding invoice has been paid, add up all the ones that have and then once the chheque is posted i reconcile it to the relevant CIS deductions, which 'crosses them off the list'. When I check the CIS account the following month i filter the report to only show unreconciled transactions.
It's a fiddle but it seems to work.

JodieR

You know what we should be doing is asking on the student forums how they're being taught to account for CIS... they probably know more about it then we do!