CIS mismatch error when trying to allocate invoices and credit notes

This explains what to do when allocating CIS invoices and credit notes together that don't match.

When this happens we show you a mismatch error.

You can continue to allocate in these scenarios. However, there are workarounds to help you to resolve them.

We show you a mismatch error when:

• You try to allocate a credit note or invoice that does not have CIS deductions
• The CIS deduction rate is different between the invoice and the credit note
• The CIS labour amount differs between the invoice and the credit note

We only show CIS deductions as paid on your monthly CIS return when you match the invoices to a payment.

When you allocate a credit note this does not affect the monthly return as you have not received a payment.

Where both the invoice and the credit note have CIS deductions, this is not a problem. The CIS withheld amounts offset each other.

When a credit note has no CIS deduction, there is  no offsetting of the CIS amount. It remains outstanding and shows on the CIS withheld ledger account.

What to do when you subcontractor provides a non-CIS credit note

This explains what to do if:

• Your subcontractor sends you a credit note for non-CIS related work
• You want to use this credit note to 'pay' an outstanding CIS invoice.

You still need to 'pay' the CIS withheld amount. Make sure it is on your monthly return.

We recommend that you:

• Record your invoice as paid in full
• Refund your credit note for the same amount and date as your invoice payment

In our example, we have a CIS invoice for £100. The withheld amount is £30. This leaves an outstanding balance of £70. You don't need to pay £70 to the subcontractor and wait for the subcontractor send a refund. Allocate £70 from a non-CIS credit note to pay off the balance.

To do this:

• Record a payment against the outstanding amount of the invoice

This shows the CIS withheld as paid and includes it on your monthly return.

In our example, we make a payment of £70. Although no actual money changes hands, £70 shows against the bank account. The CIS monthly return now reports the £30 CIS amount.

• Record a refund against the credit note

This should be for the same amount you paid against the invoice. The payment you just made cancels out.

In our example, we refund £70 against the credit note. The refund also shows on your bank account but cancels out the payment made against the invoice.

The CIS invoice and credit note have different deduction rates

The deduction rate may change between recording an invoice and recording the credit note. You will see a mismatch error when allocating the two together.

This could happen when a subcontractor issues a CIS invoice with a 20% deduction rate. The contractor could be missing important information such as the UTR. Or the HMRC couldn't find the UTR on the list of registered subcontractors. In this circumstance, HMRC require that the contractor pays the subcontractor at the 30% deduction rate.

Both parties can easily resolve this:

As the contractor:

1. Change the subcontractor's deduction rate on the supplier contacts page.
   • Learn about CIS contacts.
2. Create an invoice with HMRC's required deduction rate.

The subcontractor:

1. Is now aware of the deduction rate change. They add a credit note to the outstanding invoice to reverse the outstanding balance
2. Changes the deduction rate in their settings.
   • Learn about CIS set up.
3. Recreates and reissues the CIS invoice with the revised deduction rate.

If the CIS labour amount differs between the invoice and the credit note

In this scenario, don't try to allocate between a stand alone CIS credit note and CIS invoice with different CIS labour amounts. Arrange to refund the stand alone CIS credit note. Add a credit note to the outstanding CIS invoice.

This ensures your accounts remain accurate and ensures the correct reporting of your CIS payments.