Manually record CIS tax withheld as a main contractor on VAT Cash Accounting

Create a supplier record for the subcontractor

If you haven't already, you need to set up a supplier record for your subcontractor.

1. Click Suppliers then click New.
2. Enter the account details for the subcontractor, click Save then click Close.

Create a CIS tax withheld nominal code

You also need a nominal code for CIS tax within the Current Liabilities section of the Chart of Accounts. If you already have this you can move onto the next section.

1. On the navigation bar click Nominal codes then click New.
2. Complete the nominal record details as follows:
   

   N/C	Enter the new nominal code number, for example, 2150.
   Name	Enter the name for the new nominal code, for example, CIS Tax.

3. Click Save then click Close.

Post a supplier invoice for the subcontractor work completed

Example:

• You receive an invoice for £360 from your subcontractor Mr Brown
• This includes £200 for labour, £100 for the materials supplied and £60 VAT. In this example both elements are standard rated for VAT and CIS Reverse Charge VAT applies
• Withhold £40 (£200 x 20%) on the labour element of the invoice for CIS tax. CIS is deducted from the net element of the invoice
• Pay the £40 to HMRC together with the £60 VAT and pay Mr Brown the balance of £260

First, post the invoice from our subcontractor:

1. Click Suppliers then click Batch invoice.
2. Enter the invoice details. In our example:

   A/C	Date	N/C	Details	Net	T/C	VAT
   BROWN001	Invoice Date	6002 (subcontractors labour)	Labour Charges	200.00	T21	00.00
   BROWN001	Invoice Date	5000 (Materials)	Materials	100.00	T21	00.00

   NOTE: The tax codes used here are an example only. Use the appropriate tax code for the VAT applied on the supplier invoice. CIS is deducted from the net element of the invoice.

3. Click Save then click Close.

That's our purchase invoice posted. Once we're ready to pay this, we move onto the following section.

Record the CIS tax withheld 

We record the CIS tax withheld as a bank receipt. This offsets the supplier payment which we post for the full value of the supplier invoice to ensure the VAT Return is correct.

1. Click Bank accounts then click Bank receipt.
2. Enter the bank payment details. In our example:
   

   Bank	Date	N/C	Details	Net	T/C	VAT
   Bank account	Date of receipt	2150 (CIS Tax Withheld)	CIS Tax Withheld	40.00	T9	0.00

   The bank account must be the same as the bank account used for the supplier payment.

3. Click Save then click Close.

TIP: If you want the CIS tax withheld to appear on your supplier record, instead of a bank receipt you can post a purchase credit using the T9 tax code, and then refund it. 

Pay the subcontractor

Although we don't pay the full value to the subcontractor, the supplier payment is posted for the full outstanding amount. This offsets the bank receipt posted in the previous section and ensures that the VAT Return is correct.

1. Click Bank accounts then click the relevant bank account.
2. On the toolbar, from the Payments drop-down click Supplier Payment.
3. In Payee enter the subcontractor's account reference, enter the Date and if required, the Cheque No.
4. Click the supplier invoice then click Pay in Full.
5. Click Save then click Close.

The postings now reflect the payment to your subcontractor and the CIS tax withheld.

Pay the CIS tax to HMRC

To pay the CIS tax over to HMRC, post a bank payment. 

1. Click Bank accounts.
2. On the toolbar, from the Payments drop-down click Bank Payment.
3. Enter the payment details. In our example:
   

   Bank	Date	N/C	Details	Net	T/C	Tax
   Bank N/C	Payment Date	2150 (CIS Tax)	CIS Tax withheld	40.00	T9	0.00

4. Click Save then click Close.

NOTE: The £60 VAT is paid to HMRC as part of the normal VAT Return process.