CIS Statements

debbie2625

Hi

How do I post an invoice given to us by a subcontractor. What accounts should it go to ?

He has labour £280, materials £305 and then deducts his tax at 20% -£56
giving a total of £529

Thank you

JodieR

What accounts package are you using?
I use quickbooks and would enter a bill for £529, coding it on 3 lines to:
£280 Labour
£305 materials
-£56 CIS Liability (which is a liability account, then when the CIS is paid over to HMRC I post the cheque to the same account)

I think that others on here prefer to enter the bill as the gross amount (ie £585) and then adjust for the CIS when the bill is paid instead.

debbie2625

I am using MYOB.
Yeah thought that was how, but wasnt sure if I should post it the other way you said. Wouldnt that make my costs wrong until it was paid?

Thanks for your help

T.C.

Using Quickbooks or similar I would enter two invoices, one for the amount payable to the subbie and one for the amount due to HMRC. I would give them the same reference number, therefore tying the two together, but keeping the bills to pay correct.

Baggybooks

I post one invoice as received - debiting the total cost to the relevant nominal code and crediting the tax deducted to a control on the BS to which I would debit the payment when made to HMRC.

The tax has to be declared on a CIS300 and paid over with any PAYE. Posting it to a PL account may cause problems later.

Tax and NIC amounts aren't posted to the PL, so why post CIS?

soni2surv

I used Sage and normally a contractor account would have been created with a nominal code default to CIS labour. Therefore when the invoice was received, we will post it gross and sage would make the deduction for the CIS tax.

Poodle

JodieR wrote: »

I think that others on here prefer to enter the bill as the gross amount (ie £585) and then adjust for the CIS when the bill is paid instead.

Hi Jodie

I am not familiar with quick books. Would your posting put £585 to sales?

If it only puts £529 then that is not correct. You will be understating your taxable supplies and that could be dangerous for many reasons including VAT registration threasholds.

Poodle

Poodle

Soni

The CIS module on Sage 50 is excellent for subcontractor invoices, verification and CIS300, Just got it myself to use for clients.

It is a shame that it does not enabe an entry for deucions made by contractors though

Poodle

JodieR

Poodle wrote: »

Hi Jodie

I am not familiar with quick books. Would your posting put £585 to sales?

If it only puts £529 then that is not correct. You will be understating your taxable supplies and that could be dangerous for many reasons including VAT registration threasholds.

Poodle

No, what i mean is that some people will enter a bill coded £585 to Labour/Materials so that until the bill is paid it will appear on the purchase ledger as £585 outstanding (and look as if it's all due to the subbie). Then when payment is made, a credit note will be entered for £56 coded to the CIS liability account, which reduces the amount due to the subbie to £529. The credit note has no effect on the values posted to the COGS/expense accounts. The advantage of posting it this way is that when it comes to paying the CIS over to HMRC you can just look at the credit notes entered in that month and declare them on the return, the disadvantage is that when you come to do a weekly/monthly payrun it's too easy to forget to deduct CIS from the subbie's payment and pay him the gross amount, which is why I prefer to record the CIS when I enter the bill!
Jodie

Poodle

Hi Jodie,

I can understand why you would want to enter the credit note when you enter the invoice. One problem that I can see is that the CIS300 only requires the CIS deductions to be paid for subbies actually paid in the preceeding tax month, regardess of what date is on the subbies invoice. From what you say then you could possbly be paying over CIS to HMR&C before it is actually due! What if there is a problem with the subbies invoice or a dispute?

Poodle

JodieR

At the end of each (payroll) month I print off a list of the tracnsactions in the CIS account and mark off which ones have been paid and which are still outstanding. Then I declare the paid ones on the CIS return. When the money is paid to HMRC I post the cheque to the CIS account. Then I reconcile the CIS account (in QBs you can use the reconcile function on liability accounts as well as bank accounts), which marks the cheque and CIS deductions as reconciled, and leaves the outstanding CIS deductions unreconciled. The next month when I come to run the report of CIS transactions I filter it to only include unreconciled transactions, ensuring none are missed or duplicated.

If/(when!) there's a problem with a subbie invoice I just adjust accordingly - if, say he'd originally invoiced £100 (entered as £100 to Labour, -£20 to CIS) and then for whatever reason we only agree to pay him £60, then I would enter a credit note posting £40 to Labour and -£8 to CIS, so the net amount in the CIS account would be £12.

Jodie