Solution Properties
Solution ID:
200427112211496
Last Modified Date:
Wed Mar 23 14:24:14 UTC 2022
Taxonomy Path:
Case category//How do I...//governmental/legislative compliance
Author:
[email protected]
How to record a full refund from a subcontractor - VAT Cash Accounting
Description

This article applies to contractors who account for VAT using the VAT Cash Accounting method.

If you need to record a full refund on Standard VAT, please refer here.

These steps apply to the original Sage 50 CIS module, if you use the new Sage 50 CIS v2 module for Sage 50 Accounts v22, you should use the new CIS Refunds feature.

When working with subcontractors you may need to show refunds you have received from them in your accounts. This article explains how to record a full refund from a subcontractor. 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.

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.

[BCB:90:CIS - Sales:ECB]

Cause
Resolution

In this example, the subcontractor has 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 80.00 20.00 T1
PC 2101 CIS Tax Deduction 20.00 0.00 T1

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 100.00 20.00 T1
BP 2102 CIS withheld 20.00 0.00 T9

The following sections explain how to do this.

Step 1 - Post a credit for the refund
  1. Suppliers > Batch credit.
  2. Complete the Batch Supplier Credit window as follows:
    A/C Date N/C Details Net T/C VAT
    A/C Reference Refund Date 6000 Labour 100.00 T1 20.00
  3. Save > Close.
Step 2 - To post the supplier refund
  1. Suppliers > Refunds.
  2. From the Payer drop-down list, choose the appropriate subcontractor, from the Tax Code drop-down list choose T1, complete the date box and enter the refund amount.
  3. Select the Refund box for the credit note you posted in the previous section > Refund In Full.
  4. Save > Close.
Step3 - Post a bank payment for CIS withheld
  1. Bank accounts > Bank payment.
    Complete the Bank Payment window as follows:
    A/C Date N/C Details Net T/C Tax
    A/C Ref Refund Date 2102 Subcontractor Refund 20.00 T9 0.00
  2. Save > Close.

TIP: 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.

NOTE: 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.

 

View summary of corrections
Step Tp 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
Reduces the balance on the supplier’s account.
2 PR 1200 100.00 T1 20.00 Manually
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
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.

NOTE: Regardless of which step taken HMRC must be consulted.
4 BR 2102 20.00 T9 0.00 Manually
Refunds CIS Tax withheld on the refunded PI and corrects the CIS Liability nominal account.

 

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