How to record a full refund from a subcontractor - Standard VAT

Solution Properties

Solution ID:

200427112211126

Last Modified Date:

Thu Apr 04 15:55:26 UTC 2024

Taxonomy Path:

Case category//How do I...//corrections/adjustments

Author:

[email protected]

How to record a full refund from a subcontractor - Standard VAT - CIS v1

Description

This article applies to contractors who use the Standard VAT scheme and who are using the Sage 50 CIS v1 module.

If you have Sage 50 CIS v2, you should use the new CIS Refunds feature. To check this, on the menu bar, click Help then click About. Under Features Enabled, check if CIS v2 shows Yes.

When working with subcontractors you may need to show refunds you have received from them in your accounts. we explain how to record a full refund from a subcontractor in the steps below.

You should also use this method if you need to correct a subcontractor transaction which has already been submitted on a CIS return. Once the full refund has been posted you can post the correct transaction.

NOTE: You must inform HMRC if incorrect values have been submitted on your CIS return as this correction does not correct the CIS Return and does not appear on the next CIS Return.

Cause

Resolution

[BCB:42:CSat FB drive:ECB]

In this example, the subcontractor invoiced you for labour at £100.00 plus 20.00 VAT. To record the original invoice and payment, you posted the following transactions:

Transaction	Nominal Account	Details	Net	VAT	T/C
PI	6000	Labour	100.00	20.00	T1
PP	1200	Purchase payment	100.00	0.00	T9
PC	2101	CIS Tax deduction	20.00	0.00	T9

You then receive a full refund from the subcontractor. To record this you need to post the following:

Transaction	Nominal Account	Details	Net	VAT	T/C
PC	6000	Labour	100.00	20.00	T1
PR	1200	Purchase refund	120.00	0.00	T9
BP	2102	CIS withheld	20.00	0.00	T9

The following sections explain how to do this.

Post a credit for the refund

Click Subcontractors then click Batch credit.

Complete the Batch Subcontractor Credit window as follows:

A/C	Date	N/C	Details	Net	T/C	VAT
A/C Reference	Refund date The refund date must be within the same CIS submission period as the original. If you don't, when submitting the CIS return you get an error.	6000	Labour	100.00	T1	20.00

Click Save then click Close.

Post the supplier refund

Click Subcontractors then click CIS refunds.
Click the Account drop-down and choose the appropriate subcontractor then complete the Date box.

The refund date must be within the same CIS submission period as the original. If you don't, when submitting the CIS return you get an error.
Click the Refund box for the credit note you posted in the previous section and click Refund In Full.
Click Save then click Close.

Post a bank payment for CIS withheld

Click Bank accounts then click Bank payment.

Complete the Bank Payments window as follows, and refund the value of the CIS deduction only:

Bank	Date	N/C	Details	Net	T/C	Tax
Bank nominal code	Refund date The refund date must be within the same CIS submission period as the original. If you don't, when submitting the CIS return you get an error.	2102	Subcontractor refund	20.00	T9	0.00

Click Save then click Close.

When you reconcile the bank account, you should reconcile the purchase receipt and the bank payment against the refund transaction that appears on your bank statement.

If a refund of the outstanding tax is received from HMRC, you must post a bank receipt from nominal code 2102 using a T9 tax code. Alternatively, HMRC may advise you to reduce your next payment to them, in which case your next bank payment posting to HMRC should be reduced by the value of the refund.

Summary of corrections

Step	Transaction	N/C	Net	T/C	VAT	Posted...
1	PC	The same nominal code that was on the original invoice.	100.00	T1	20.00	Manually
1	Reduces the balance on the supplier’s account.
2	PR	1200	120.00	T9	0.00	Manually
2	Corrects the balance on the subcontractor account and puts the money back into the bank account. This is the full amount of the PC and not the actual amount refunded. The bank balance is corrected by the BP in step 5.
NOTE: If the subcontractor is a gross payment subcontractor, you do not need to complete steps 3 and 4 as no liability was accrued for the transaction.
3	BP	2102	20.00	T9	0.00	Manually
3	Corrects the bank account following Step 2 and also reduces the CIS Liability.
If reducing amount paid to HMRC in next period, stop at Step 3. If HMRC refund the value, complete Step 4 when you receive the refund. Regardless of which step taken HMRC must be consulted.
4	BR	2102	20.00	T9	0.00	Manually
4	Refunds CIS Tax withheld on the refunded PI and corrects the CIS Liability nominal account.

[BCB:19:UK - Sales message :ECB]

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