Accounting for CIS
I have just taken on a new client who has to pay CIS for the sub contractors he users. I understand that he needs a UTR number for each subbie, then HMRC tells him what rate of deduction to make from their payments. There is a monthly return to HMRC & the CIS deductions are paid across to HMRC at the same time as his monthly PAYE & NI Payments. He is now VAT registered. I have set up Sage instant accounts for him, so do I set up a separate nominal code for CIS in the same range as PAYE & NI? Am I correct in saying that, for example, if he is invoiced £1000 + vay by a subbie and the deduction rate is 20%, the subbie is paid £800, VAT £200 & CIS £200?
Thank you!
Thank you!
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Comments
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No.
Firstly you need to set him up online so that monthly statements and subbie verifications can be made online.
The payment statement needs to break down the materials and the labour costs. The deduction is only made from the labour element. You also need to make sure that each sub-contractor is verified before you deduct this, as he may be under a different deduction, ie paid gross, 20% or 30%.
I would advise that you read up on the subject of CIS or attend one of the AAT seminars. It is quite a complex scheme if you have no knowledge.
If you need more advice, send me a pm, this is my favourite subject!0 -
Can I just jump in here a min?
Really stupid question (I feel like I'm full of these at the moment!).
I was told (by the partner who did CIS here) that returns are made on an accruals basis, i.e. based on the invoice date of the subbie. Last time I did a CIS return I noted that the wording on the HMRC software is "payments made" implying a cash basis. Said partner has now left and I'm stuck with CIS returns and not a great deal of knowledge about them. Can anyone clarify? Thankyou!0 -
For what it's worth, I've always used the payment date and was advised this by an accountant.0
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We use payment dates too0
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Having worked with CIS for over 15 years - old scheme and new scheme I can assure you it is definitely based on the payment date - not invoice date.
1011? make sure you get the following details or you will be hit with 30% deductions. UTR, NI Company name etc.0 -
Yep, I agree.0
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Do you mind if I jump in too? A fair proportion of my future clients are likely to be small builders, sparkies, plumbers etc so CIS something I need to get my head round. Can you tell me if I’ve got the following two scenarios right?
1. A householder contracts with a builder to do an extension. The builder recommends an electrician, plumber and gas fitter who each contract directly with the householder for their parts of the build. This is all outside the scope of CIS as each are invoicing the householder.
2. Householder contracts with a builder to do an extension. The builder outsources the electrics, gas and plumbing and pays the electrician, plumber and gas fitter from revenue received from the householder. In this case the builder is a contractor and the sparky, plumber and gas fitter are sub-contractors for CIS purposes.
From my dealings with sparkies, I’ve found they tend to price and invoice on a per fitment basis eg £45 for a double socket installation, £25 for a light fitting installation. I can’t work out how this fits in with CIS as it’s effectively all materials and no labour. In fact this has made me wonder what stops a subbie inflating the materials element of his invoice and understating the labour charge to minimise the CIS deduction.0 -
Fireraiser wrote: »Do you mind if I jump in too? A fair proportion of my future clients are likely to be small builders, sparkies, plumbers etc so CIS something I need to get my head round. Can you tell me if I’ve got the following two scenarios right?
1. A householder contracts with a builder to do an extension. The builder recommends an electrician, plumber and gas fitter who each contract directly with the householder for their parts of the build. This is all outside the scope of CIS as each are invoicing the householder.
2. Householder contracts with a builder to do an extension. The builder outsources the electrics, gas and plumbing and pays the electrician, plumber and gas fitter from revenue received from the householder. In this case the builder is a contractor and the sparky, plumber and gas fitter are sub-contractors for CIS purposes..
yes that's correct
[/QUOTE] From my dealings with sparkies, I’ve found they tend to price and invoice on a per fitment basis eg £45 for a double socket installation, £25 for a light fitting installation. I can’t work out how this fits in with CIS as it’s effectively all materials and no labour. In fact this has made me wonder what stops a subbie inflating the materials element of his invoice and understating the labour charge to minimise the CIS deduction.[/QUOTE]
Some subbies will inflate the costs of materials to minimise CIS deductions - i think that the contractor may have an obligation to query invoices which look unrealistic, but I do warn my subbie clients that if they get an inspection and the actual cost of materials in their accounts is only a fraction of what they've declared on their invoices then there may be consequences.
I'd say that in the real world only about 20% of subbies (that I deal with) include any materials on their invoices so it's not really a major problem.0 -
Hi I am new to dealing with CIS Subcontractor Invoices.
When we receive a CIS Labour Invoice we process this on SAGE 50 Accounts, however when it comes to processing the payment, we wish to make further deductions from their net pay for damages or any unauthorised mileage they may have done, can someone please advise how they address this? Do we Invoice them back for damages and unauthorised mileage use?0 -
We use Axim for our accounts package anyone else?0
