Create a customer record for your client
- Click Sales, then click Customers, then click Maintain Customers.
- Enter a Customer Code and Name.
- Enter the details for the record.
- Click Save, then click Yes.
Create an IR35 deductions withheld nominal code
We recommend you create a new nominal code for IR35 deductions within the Current Liabilities area of your chart of accounts. You can check your chart of accounts categories in Nominal codes, Chart of accounts.
- Click Nominal then click Nominal Account, then click Maintain chart of accounts.
- Create a new nominal with the following details:
Number & Dept Use a number in the 2100 range, for example 2103. Description Enter the name for the new nominal, for example IR35 deductions. Account Type Select Liability from the drop-down list. Nominal Group Select your required Nominal Group. Analysis Category Select the required Analysis Category.
- Click Save then click Yes.
- Click Cancel.
Post a customer invoice for the work you've completed
- From the menu bar, select Sales, then click Enter/ Change Journals, then click Enter/ Change Customer Invoices/ Debit Journals.
- Create the invoice, entering the following information, using the TAB key to move through the various boxes.
Date Enter the date of the invoice. Type Choose SL Invoice. Customer Code Enter the required customer code or press F2 and select the customer code from the look-up list. Net Enter the net amount of the invoice. VAT rate Select the required rate.
- To save the transaction, click Save or press TAB and when asked to save the entry click Yes. The posting number is displayed in the bottom right corner of the window.
If you use the Standard VAT scheme, you must post record the IR35 deduction withheld as a credit note, then allocate it against the invoice.
VAT Cash Accounting
If you use VAT Cash Accounting, you must post a receipt for the full value of the invoice, then post the IR35 deduction withheld as a bank payment.
Record the receipt from your client
Although the amount you receive from the subcontractor is reduced by the value of the IR35 deduction, the receipt you need to post is for the full invoice amount. This ensures that your VAT Return is correct. The overstated customer receipt is offset by a bank payment posted to record the deduction. Read more >
Record the IR35 deduction withheld
The IR35 deduction is posted as a bank payment to the new nominal code. This offsets the customer receipt which is posted for the full invoice value to ensure your VAT Return is correct. Read more >