Stupid Question Alert - Ltd co being a contractor and sub-contractor

JamesB

Hi all and apologies in advance for stupid post!

I have never really dealt with CIS that much before so need a bit of advice!

Example Ltd carry out work for a contractor (company A) thus when they invoice them say for £100 company A deduct 20% CIS and pay them the net amount of £80. I assume company A then pay this 20% over to HMRC as part of their monthly CIS returns.

Therefore when it comes to preparing the year end accounts for example ltd I assume the double entry is:
CR sales £100
DR corp tax £20
DR sales ledger £80

The company then prepare corporation tax computation as normal and at the end the yearly CIS deductions (£20) are deducted from the tax due?? or have I got this completely wrong!!??

Example Limited also have sub-contractors who carry out the work so monthly CIS returns are prepared by Example Limited to pay this tax over.

Which leads me nicely on to my next question regarding CIS deduction 'set-off'. Has anyone had any experience with this? I will hazard a guess that instead of paying over the CIS deducted on the companies sub-contractors they set this off against the CIS suffered from company A (£20) and pay the balance?

My final question is regarding VAT. Example Ltd's expected turnover is probably £100,000 so I assume they will need to register for VAT. Once registered am I right in saying invoicing will look a bit like this:

Labour £300
Materials £75
Sub-total £375
VAT £75
Total £450
Less CIS (£60) (due on labour element only?)
Net £390

Sorry for the silly examples and I hope it makes some kind of sense.

Thanks in advance for any replies.

J

JodieR

CIS which is witheld from money received from a contractor can (in the case of a Ltd Company) offset it against CIS due to be paid to HMRC which has been deducted from subcontractor payments, and against PAYE & NI payments from employees. If neither of these apply or the CIS from contractors exceeds the amount offset then the balance can be offset against corporation tax (although people have had issues getting HMRC to actually do this), or a refund can be requested after the P35 has been filed.

And you're correct with your second excample.

groundy

You can only reclaim CIS for a company through the year end P35 (but expect to wait at least 6 months for your client to see the money plus extra work for you confirming refund due). If the P35 refund has not been received by the time the CT payment is due then you can request for one to be offset against the other. Once again this will cause confusion with HMRC as CT can not access PAYE records!!!!!

Good Luck we deal with lots of these and it isnt getting any easier.