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CIS-Journal entries

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  • Practice Licence
  • 18 posts
  • # 92887

Taking on new client, no interest in actually do CIS (to much hassle) but I need to post the payroll output.  
Accounts a bit of a mess, hence I am being brought in.
Net pay and NI/PAYE are not reconcilling to zero (another story)

I can see these entries

1.   Cr Sales Dr Debtors for full value of invoice
2.   Customer sends CIS statement wth deductions showing 
3.   Raise credit note for the CIS amount,  Cr Debtors  at present the DR is going to a CIS control account  (not sure what is happening to the Dr entries on the CIS account, there is a large DR balance.  ( I would have throught the CIS should be going to the NI/PAYE control account to show the reduction in what is due

Is that how you recognise it? 


I would do it 

1. Cr Sales Dr Debtors full value of invoice
2. CIS statement is received
3. Dr Debtors Cr NI/PAYE CIS amount
4.  Post payroll journal, Cr PAYE/NI the monthly amount, the DR entry of the CIS produces the NET amount payable, and the payment from the bank reconcilles the NI/PAYE control account to zero.


Any thoughts?

Andrew



 
  • 794 posts
  • # 92892

Hi Andrew,

There should be a separate CIS control account because if client has CIS deductions from work he does and he deducts CIS from his subcontractors you need to be able to see what is actually due to be paid or reclaimed from HMRC.  It may be that your client is Gross Status so the amount in this control account would be due to HMRC.

The payroll journal is totally separate and does not include any CIS info.
Payroll journal as follows:

DR Gross wages
DR Employers NI
CR PAYE & NI including Emp NI
CR Net wages

When you pay net wages through the bank this will set Net Wages back to Zero.
When you pay PAYE & NI plus CIS through bank this should set those accounts back to zero also.
If there is CIS due to be claimed back from HMRC then you would deduct this from PAYE & NI due and again the accounts would be back to zero.  

From what you say I suspect the payments for PAYE & NI and CIS have all been posted to the PAYE account only.
This can only be checked by going through the whole list of payments in both ledgers I'm sorry to tell you!

Hope this makes sense to you but if you require any further assistance please email me direct:
mms@mmauran.plus.com
Marilyn

Edited at 15 Aug 2013 12:06 PM GMT

  • A clever person solves a problem.

    A wise person avoids it.

    Albert Enstein


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  • Member
  • Practice Licence
  • 18 posts
  • # 92909

Appreciate the feedback.
 
I now understand why you need the control account to see the net position of suppliers deducting CIS off invoices and sub contractors needing deductions taken from their invoices.
 
This new client is a subcontractor only so they are having 20% deducted from their invoices. 
 
So the double entry would be:
 
Cr Sales Dr Debtors Full value of the invoice 
Raise credit note as :
Cr Debtors Dr CIS Control 20% (net value not including VAT, for  the labour).   Also ensuring we have the statements from the customers to show the CIS deductions. 
 
So there is a debit value on the CIS control account. 
 
When payrol journal is posted the NI/PAYE has a credit value as my client is paying the 3 members of staff through the payroll. 
 
I assume you journal each month the CIS value from the CIS control account to the NI/PAYE control account to get the net value to pay to HMRC.  When you do the bank posting the NI/PAYE will reconcille to zero. 
 
 If not there would just be a large debit value building up on the balance sheet in the CIS control account with no where to post it?
 
Thanks for you help,
 
Andrew
Lady of Ledger
  • 491 posts
  • # 92918

I think you are getting your Contractor and Sub Contractor getting mixed up


If your client is a Contractor - his Customers will be deducting CIS from his Debtor invoices - this deduction is an assett and can be offset against PAYE/NIC liability payments from employees IF the company is Limiited - but not if they're sole trader.


If you client is a Sub Contracotr - his Suplliers, if under the CIS scheme, will have to have CIS deducted FROM them - this deduction is a liability that must be forwarded onto HMRC.


Your client may of course be a Contractor AND and a Sub Contractor - but it's important that you get things the right way around otherwise you could get in an awful mess!!!

Hope this helps
Carol           

  • Carol Saunders
    Lady of Ledger Book Keeping
    Telford, Shropshire



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  • 794 posts
  • # 92919

Hi Carol,

Thanks for you input.
I spoke with Andrew today and everything is understood and ok now.

Marilyn    

  • A clever person solves a problem.

    A wise person avoids it.

    Albert Enstein


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Lady of Ledger
  • 491 posts
  • # 92928

Well done Marilyn

It's a confusing subject if you're new to it! 

  • Carol Saunders
    Lady of Ledger Book Keeping
    Telford, Shropshire



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