Sage 200 - Posting deductions for off-payroll working rules (IR35)

Create a new IR35 nominal code

We recommend you create a new nominal code for IR35 deductions within the Balance Sheet section of your Report Categories.

TIP: In Sage 200 Standard/Education you can check your Report categories in Settings, Cash Book / Nominal Ledger, Report Categories. In Sage 200 Professional, go to Nominal Ledger, Utilities, Ledger Set Up, Report Categories. 

1. Click Nominal, Nominal List then click New Account.
2. Enter the new nominal code details as follows:

   N/C	Enter the number for the nominal code you want to create, for example, 2103.
   Cost centre	Select an appropriate cost centre if required.
   Department	Select an appropriate department if required.
   Active status	Active.
   Report Category	Select a report category which is representative of a liability on the balance sheet.

3. Click Save then click Close.

TIP: You may want to consider reviewing your financial statement layout to ensure acceptable placement of the code. 

If you use nominal link

If you manage deductions as part of your normal payroll processing, there are some nominal link changes and additional postings you must make in Sage 200 to account for the IR35 deduction.

1. To ensure your nominal link posting are correct, you must adjust your nominal link settings to account for the IR35 element. Find out how >
2. Once you've processed your payroll, run the nominal link as normal. Provided you've carried out the nominal link changes in step 1, this posts a debit amount to the IR35 deductions nominal code.
3. In Sage 200, post the invoice from your contractor as normal.
4. In Sage 200, post a credit note to the IR35 deductions nominal code. This reduces the amount due to the contractor and posts a credit to clear the IR35 deductions nominal code. For example:
   NOTE: For the invoice you must use the appropriate VAT code dependent on the supply.
   

   Type	A/C	Date	N/C	Details	Net	VAT Code	VAT
   Purchase invoice (PI)	S001	Invoice date	5000	Invoice	1000.00	1	200.00
   Purchase credit (PC)	S001	Same date as nominal link postings.	2103	IR35 deductions	300.00	A VAT code not applicable to the VAT Return.	0.00

   NOTE: You may need to set up a non-vatable VAT analysis code to report correctly. Find out how in our guides for Sage 200 Standard/Education and Sage 200 Professional.

5. When you pay the invoice, you can allocate the credit note and pay the difference to your contractor.

If you post manual salary journals

If you normally post manual salary journals in Sage 200, for any deemed employees you must post the following four additional journals to account for IR35 deductions:

NOTE: For deemed employees no other journals are required, for example, for gross pay or net pay. You must still post your normal salary journals for any other employees.

You should also post the invoice from your contractor as normal, plus a credit note to reduce the amount due by the IR35 deduction you've made. For example,

NOTE: For the invoice you must use the appropriate VAT code dependent on the supply.

When you pay the invoice, you can allocate the credit note and pay the difference to your contractor.

Manage deductions outside of your payroll

If you process IR35 deductions separately from your payroll, you should post the invoice from your contractor as normal, plus a credit note to reduce the amount due by the IR35 deduction.

NOTE: For the invoice you must use the appropriate VAT code dependent on the supply.

When you pay the invoice, you can allocate the credit note and pay the difference to your contractor.

When you pay the deduction to HMRC, post the bank payment to the IR35 nominal code to clear the liability.

TIP: If the IR35 deduction is to be offset rather than paid directly to HMRC, you can post further journals to move the balance as required. 

Further information

• Visit our blog > 
• Find out more about changes to IR35 rules >
• Visit GOV.UK >