CIS deduction for subcontractors

When invoicing a customer that is part of the Construction Industry Scheme should the tax being deducted just be added to the invoice or does it need to be allocated somewhere to show that tax has already been paid throughout the year?

The invoices also include VAT

Hi @BidderGroup

To record CIS, take a look at these previous posts:
http://community.quickfile.co.uk/t/cis-for-ltd-company-vat-registered-no-paye/2030
http://community.quickfile.co.uk/t/managing-cis-tax-taken-on-sales-invoices/1732
http://community.quickfile.co.uk/t/cis-scheme-how-to-record-invoices/4313

Our VAT registered partnership carries out a variety of services for other businesses. A new customer has informed me the services we have just invoiced them for come under the CIS as they are contractors, therefore they will be deducting tax from the invoice amount. I have the same question as @BidderGroup, and have spent a good deal of time going round in circles trying to make sense of the various suggestions so far. Please could someone post a start-to-finish, simple step-by-step description with illustrations of how to record the transaction, including payment received, on QF? It appears there are several ways to kill this particular cat but I need one that is quick, painfree and effective!

Hi @MaryJ

There’s a post on our old forums which shows this process with screenshots (although the appearance has changed a little bit!):

http://www.qfaccounting.co.uk/detail.aspx?id=4010881

I hope that helps?

Thanks for the quick reply. I had looked at that post, but on reading other posts and looking at other book-keeping forums I thought the CIS deductions shouldn’t reduce Sales turnover, which is what this would do in effect if you give it a Sales nominal code. Or have I misunderstood it?

We’ll look at producing a guide to this shortly.

It would almost be a mirror to this guide. You would record the full invoice value otherwise your income figures would be lower than what they actually are. The company you invoice (the contractor), would just pay 20-30% lower than what’s been invoiced (this depends on their registration with HMRC (see this guide).

For example, we invoice for £500.00, they pay 80% - £400.00.

Then, as per the guide I linked to above, you would have a dummy CIS bank account that you would tag the invoice as paid in full to.

When the money actually arrived (the £400), you would tag it as a transfer to the CIS account, essentially making your CIS account -£100.

Note: I’m not an accountant

Wouldn’t that make it appear the invoice was paid while it was outstanding? I think I understand the process a bit better but it still seems very complicated.

No, as it’s being marked as paid in full from the CIS dummy account, it wouldn’t show as outstanding. What you would be left with is a £100.00 deficit in that dummy account which would need to be journalled. I’ll have to double check on this and come back to you (unless an accountant can add to my post). Or, if you have an accountant, it may be best to ask them

So if it’s marked as paid (by the CIS dummy account) before the customer pays the invoice would I still be able to send reminder emails and statements to the customer showing it as due for payment?

You can manually, yes. However, there’s nothing saying that you have to mark it as paid before the money is received. You could wait until the money comes into your main bank account from the client before doing any of the above.