CIS subcontractor – Record payment from a contractor – Standard VAT

As a subcontractor who has CIS tax withheld by your contractors, once you've recorded the work done for a contractor, it's easy to record the payment you receive and the CIS tax withheld. Here we'll walk through the steps for the Standard VAT Scheme. If you're on VAT Cash Accounting you can find more help in our alternative guide.

Post a customer credit for CIS tax withheld

Let's look at the following example:

• We've completed work for Bloggs and Co, the main contractor.
• We've invoiced them for £350, consisting of £200 for labour, and £150 for materials. In this example, both elements are zero rated. 
• The contractor pays us the money due, but retains the CIS Tax value of £40, which they pay to HMRC on our behalf.

First we post a sales credit to the CIS Tax Liability code for the tax withheld:

1. Customers then click Batch credit.
2. Enter details of the CIS tax amount withheld by the contractor. In our example:
   

   A/C	Date	N/C	Details	Net	T/C	VAT
   BLOGGS01	Receipt date	2102 (CIS Tax Liability)	CIS Tax Liability	40.00	T9	0.00

3. Click Save then click Close.

The sales credit represents the CIS tax withheld by the contractor and we can now allocate this to the sales invoice.

Allocate sales credit and record receipt from the contractor

1. Click Bank accounts then click the bank account receiving the payment.
2. On the toolbar, click Customer receipt.
3. In Account enter the contractor's account reference, then in Date enter the receipt date.
4. Click the customer credit, click Pay in Full, click the customer invoice then click Pay in Full.
5. Click Save then click Close.

That's it, we've posted a sales receipt for the invoice amount less the CIS tax withheld.

Next step

If you receive any CIS tax refunds from HMRC, you can simply post a bank receipt. 

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