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Hi all
I was wondering if anyone could give me some advice regarding CIS Taxation I have been asked to take over the Bookkeeping for a sole trader he runs a building company. He started in Oct 2009 and has not used a Bookkeeper how ever he has got an accountant during the time he has been trading he has been using Sub-Contractors. And has just been paying them a wage and not stopping any tax as they all work self-employed. But he has now been told by his accountant that he must stop there cis tax at sauce and send it to HMRC. And to get a Bookkeeper as his paper work is in a bit of a mess.
And this is where I need a bit of help as I have not dealt with cis tax before I have Sage line 50 2010 but do not have the cis tax system with it so what is the best way for me to enter the cis on sage i was thinking if the sub-contractors gives him an invoice for the work carried out lets say it was for £500 and the tax is £100 then could i split the invoice and Put £400 to N/C 6002 Sub –con and £100 to N/C 2212 cis tax so this part would be a liability till paid I am hoping his accountant will do the paper work for HMRC and i will just keep track of it
Thanks for any help anyone can give me
Martyn
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Hi Martyn
I hope this helps, but I think you need to be very careful providing work on an area you seem unsure of to without letting your client know.
I only say this because of the wording of your question and entering to the 6000's for cis subcontractors account , this would be the code for the P&L account as part of direct costs if your client was the "contractor". It would be the 4000's code that you would use for your clients income and not a cost code. I hope I can explain how the system works , as it might make it easier for you to understand the entries and the whole CIS system. I hope this helps
I am presuming your client is the subcontractor and not the contractor from reading the question.
(This assumption was wrong by me but it all still applies .Martyn's client is the " the Contractor" .) and I have fixed accordingly
1) Your client subcontractors need to Invoice your client " the contractor" the full amount with no tax deductions mention on the invoice , this is a common mistake which causes a subcontractor to have more tax deducted at source .
2) The subcontractors to your client must break down his invoice into separate amounts including vat if he is registered , by the amount for materials and the amount for labour , the reason for this depending his verification as to whether he is Net standard rate or Net Higher rate, he or she will only be taxed at source on his labour element of the invoice.
The Subcontractors must provide your client the contractor a CIS Card and their UTR Number to the HM. The Construction Industry Scheme (CIS) card is a necessary plastic card that allows you to work legally as a self-employed construction worker in the United Kingdom. The card, which is issued only by the HM Revenue and Customs , displays his name and occupation. The CIS established a set of rules for how payments to subcontractors for construction works must be handled by contractors in the industry, according to the HM Revenue & Customs website. Without your CIS card, you are illegally working, which could result into jail time or criminal fines.
The Contractors duties to the subcontractor
The contractor is by law required to issue your subcontractor with a Subcontractors Statement for payments paid to your subcontractor for between the 6th and 5th of each month.
The Statement will show how much in that month your client has been paid for labour and and materials and also exactly how much tax has been taken at source for that period.
The contractor is then obliged by law to send a CIS return to the HM Revenue by the 19th of each month and pay the HM all the CIS tax they have deducted from the subcontractors .
The Accounting Bookkeeping entries
There are a couple of scenarios you could use . As you have not mention in your question whether there is retention usually 5 to 15% depending on the building firm is involved or whether you entering by Bank payments or Creditors . I will presume your are entering using bank receipts ,if not let me know and I show you to cover them for creditors in sage and what happens if you have retention involved.
Edited at 16 Jan 2011 07:41 PM GMT
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Hi Sarah
Thanks for getting back to me it will be the client that will be paying his lads as Sub-contractors giving them the work and paying there wages and he will have to stop there tax if that help you to understand what i need help with
Martyn
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Hi Sarah
My be i can put it this way the client gets a job come in to fit a new bathroom lets say cost £6000 customer is happy so we now have a sale to the client he then takes on to lads to help with the work ie Sub con customer pays client the £6000 bank receipt uesing N/C 4000 lads now give him there invoices for the work they did on the bathroom client now has to pay but with holds the cis tax and pays them the balance and so it is this part i need to enter
Martyn
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Hi Martyn
It was hard to tell by the question as there is a lot more involved in cis than one entry because it involves your subcontractors statements as well. verifying all the contractors and getting the utr numbers completing CIS returns each month for the HM
It still concerns me that you are providing the service. Please do not take this as a criticism. As I learned the hard way when first starting CIS returns , but it is unclear ,will it be you, as the bookkeeper be responsible for the above and the payments with the tax deducted and the retention and submitting the returns .
CIS is one of the mostly heavily fined sectors in the HM it is a £100 pound fine for every late return each month and a £100 for every each month till the return is received . and a £100 pounds for every return, after that miss one verification or UTR number when doing the return and you find out your returnn is late . The CIS HM department are a mess, and extremely inefficient when dealing CIS returns.
All the above re the contractors applies to you , if it is the the accountant that is responsible for deducting tax at source and only on labour as explained , then I think you should sit down with him and ask him how he would like it entered . Also all this must be explained to your subcontractors for their invoicing to your client. He needs to have their invoices otherwise they could potentially regarded as employees without their invoices and therefore should be under payroll. He also needs to check that each subcontractor qualifies under the rules of CIS subcontractors . As I say it is a minefield
Please do not put yourself in the position where you could end up paying the fines for late returns. Let me know and I am happy to help and guide you as much as I can .
I have CIS as module which does all the statements and cis returns but you do need to use the creditors subcontractors and not bank payments. It cost about £250, that might seem a lot but do not be fooled into the amount of time it takes to do the the returns and statements if you do not have the correct system and try to do it using excel. Make sure your client is aware of the costs involved.
With regards to the bookkeeping entry it depends if you are doi
ng the above as you will need to use the creditors Cis module to do the statements and not useing the bank module ie receipts and payments.
Kindest regards , Sarah Douglas, Douglas Accountancy and Bookkeeping Services . Glasgow
Edited at 16 Jan 2011 07:46 PM GMT
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Hi Martyn
Yes I know it all seems a lot for the guy doing a bathroom and unfortunately that is what CIS involves , out of interest are do all his guys qualify and have CIS cards . You are not allowed deduct any tax if they have not supplied your client with their CIS card and UTR number so they can be verified by the HM and also does your client have his Contractors registered date as again he cannot deduct tax if he does not.
I think you need to have a detailed talk to the accountant, because if you enter it using receipts and payments you will be creating a lot of work for yourself or maybe him and adding on costs to your client. You need to confirm from your client who is doing what to cover yourself . let me know so we can discuss the bookkeeping entries more as it makes a diference if you are doing the statements manually or going to use sage CIS mudule.
Kind regards. Sarah Douglas . Douglas accountancy and Bookkeeping Services. Glasgow.
Edited at 16 Jan 2011 02:56 PM GMT
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Hi sarah
i have not took this client on am meeting him this week but have told him i can not do cis tax returns and he will have to get his accountant to do them i was only going to enter the amounts on to sage and no more
martyn
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Hi Martyn
Sorry for over the top detailed response and the concern about providing the service . I just wanted to make sure as the question was a bit vague. I know you mention the accountant would do the rest ,but I was not sure by the question that the accountant would be involved each month as in my earlier days of business I had to learn the hard way. I hope it helped anyone because it is always good to show the client you have the knowledge . Back to the entries.
Bookkeeping Entries
1) enter the amount paid to the subcontractor which is the net not the gross only using BP and using the 6000's code for your subcontractor cost. Remember to take into account vat if the subcontractor is vat registered.
2) Create a journal Db the 6000's code with the amount of the tax deducted and CR the 2212 code you where going to use for CIS.
Using Creditors
If you are entering the Invoice through Creditors it is the whole invoice lets say £600 the total would go to your 6002 code and you do not spilt it in to the cost and tax otherwise you would be reducing the costs in the Profit and Loss by the tax deduction and increasing his your clients tax bill.
It is when you make the payment the tax entry gets accounted for. Because you do not have the sage CIS module you will need to do a suppliers payment for the full amount clearing him as a creditors.
Using the same payment reference set up a journal and Db 1200 your bank account with the cis tax deducted and CR 2212 CIS Account with tax deducted.
This means that when Your CIS tax deducted is paid with your monthly PAYE and NI bill .
The HM payment would be entered by a bank payement to clear the monthly 2210 as the NI and Paye are together now and 2212 CIS tax account account back to zero for each month .
Edited at 16 Jan 2011 03:41 PM GMT
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Hi sarah
i have just had a chat with the client and got more info of him with regarts to the cis tax he tells me that he started deducting the tax in september 2010 and will be doing all the returns to HMRC him self so all he wonts me to do is log the payments he has made to HMRC and how much the payments to his lads are he tells me they all have there cards and just wonts it all on sage as it is on papper at the moment and can not keep track of his day to day trans
Martyn
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Hi Martyn
I just edited my response to included entry using creditors as option for you as well.
Martyn if he is a new client, I would ask him to confirm in writing that he is taking the responsibilty for all the returns just to cover your back as my understanding in the question and reply you may have thought the accountant was completing this work.
Anyway just to say enjoying the discussion.
Edited at 16 Jan 2011 03:51 PM GMT
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Thank you Sarah
you have been a great help to me we all need help sometimes 
so thanks i am also enjoing it and like you say it is a mind field lol i could do with
a drink ofter all that lol
Edited at 16 Jan 2011 04:13 PM GMT
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Hi Martyn
Your welcome, I am believer the more you ask the more you will find out and yes we all need help and I really pleased we have this forum. I which I had someone to guide me when I first did CIS and someone to supply me with a few glasses of wine, it was hard to take it all in and had to do most of the research myself as not many of the accountants I worked with knew all the in and outs it has paid off though I have a big client that is a Contractor. Really enjoyed the chat
Edited at 16 Jan 2011 04:36 PM GMT
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Martyn
This should be posted under the technical queries section so the Institute technical bods can cast their eye over it to make sure all the advice is correct (Which having read most of Sarah's posts is the case)
This section is for businesses and sole traders seeking a bookkeeper
Cheers
Stuart
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Stuart
you are right but by the time i noticed where i had put it was to late and as its my first time uesing the forum hope you will let me off lol but will know for the next time
Thanks Martyn
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I thought HMRC stopped issuing cards sometime ago? To operate the new scheme a Contract has to verify a sub-contractor with HMRC before paying them.
Hrmc will then tell the Contractor to either:
1. Pay the subbie gross - if they've elected to receive their monies that way
2. Pay the subbie net of 20% if the subbie is verified and hasn't elected for 1.
3. Pay the subbie net of 30% if the subbie can't be verified by HMRC.
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Hi Tony
You are right they stop issuing cards a while back but only the cards everything else is the same , The subcontractors who have the cards to not need to re- register. Every new subcontractor has to register with the HMRC otherwise they are working illegally, this is not the responsibillty of the Contractor but that of the Sub-Contractor. Mind you in saying that no Contractor should take on a sub- contractor if he can not show he is registered or been verified other wise that subcontract worker is working illegally.
It is not just a case of the contractor verifying them for the the tax as discussed in one of the replies Net Standard Rate or Net Higher rate, which is the 20% and 30% as you correctly mentioned in your post and is probably clearer. I was using the Sage CIS Module wording. Also just to mention they only usually grant the Gross status if they are a contractor as well as a subcontractor and there is a strict criteria to be granted this status which a subcontractor has to apply for.
The Contractor must make sure for each subcontractor for the work involved they would not become an employee.
Martyn is been asked to complete transactions by her client, I was trying to advice that she she should not do this unless, he can provide her with the evidence that he is complying with the CIS Rules and paying the HM the CIS tax deductions each month and completing the returns. I was trying to help clarify if the accountant was doing these returns .
I feel she should ask the client under MLR rules that he has the relevant documents and is properly registered. It would be nice to see what the ICB view is regarding this issue. Hopefully they will had their view tomorrow.
They will not be able to verify them if the subcontractor has not registered or is not under the previous CIS card Scheme. I hope this helps to clarify. My main concern was to make sure Martyn was aware of the implications of the main rules and the duty her client or she may of had in working in the area of CIS.
Edited at 17 Jan 2011 12:18 AM GMT
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sarah said:
Every new subcontractor has to register with the HMRC otherwise they are working illegally, this is not the responsibillty of the Contractor but that of the Sub-Contractor. Mind you in saying that no Contractor should take on a sub- contractor if he can not show he is registered or be verified other wise that subcontract worker is working illegally.
I wouldn't have thought they were necessarily working illegally. Take for instance a painter and decorator. Just say that 99% of their work was in domestic houses but every now and then a main contractor wants them for a newly built property. They are not working illegally and the main contractor would deduct 30% from the labour element of their invoice if they hadn't registered. Is he or she going to register when so few of their jobs would have tax deducted? They are not working illegally.
If it turns out that there was going to be a lot of jobs like this they probably would then register and have the tax deducted at 20%.
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Hi Peasie
Welcome to the discussion. Its good to see so much interest. I hope the ICB will add their view to this topic.
I would prefer not to get into a discussion as to whether an example of individuals is illegally working or not as that is not my expertise , the rules were developed for the construction industry, and the HM would be the only ones who would make the decision case by case .
My response is to Marytn question was to make her aware of the rules and the Potential HM Fines when carrying out this type of work. as her client is a Contractor and not Sub Contractor and she is preparing books for her client and their duties as a Contractor to check employment status and whether they are allowed work and to cover the bookkeeping entries.
I cannot stress enough that is important that before you offer a service to a client you should do some research and be aware of the in and outs which Marytn has done . I am sure that Martyn will look into this topic further as any member should when they ask a question on a forum. Advice should only be taken as guidance as Stuart mention in a post that the ICB should always check techinical answers which I totally agree.
I would just like to say I find the CIS rules overbearing and not practical, but i have seen clients heavily fined for not obeying the rules and I am trying to make sure one of our members is aware of the rules. How regular someone works or does not work does not make a difference as I said the HM would make the decision case by case.
The subcontractor must check that the Contractor is registered under the CIS scheme before he completes work. This is to protect Subcontractors form Fraudlent Contractors and the Black Market. My main concern is that a client does not try to blame the bookkeeper for their inaccuracies. I have copy some of the rules from the HM Website for further discussion.
Contractor registration and obligations
The Construction Industry Scheme (CIS) is a set of rules for contractors and subcontractors in the construction industry. If you're a CIS contractor (including a deemed contractor), you'll need to register with HM Revenue & Customs (HMRC). You'll also have to follow certain rules to make sure you pay your subcontractors within the scheme correctly.
The things you'll need to do include:
- verifying your subcontractors with HMRC
- paying your subcontractors in the right way - making deductions if necessary
- paying over deductions to HMRC
- giving subcontractors deduction statements
- sending monthly returns to HMRC
- keeping proper records
This guide will help you understand your responsibilities and obligations under CIS if you're a contractor or deemed contractor. It explains when and how to register for CIS, and how to go about following the CIS rules. It also provides links to further guidance on deemed contractor status.
On this page:
Registering as a CIS contractor
All contractors covered by CIS need to register with HMRC. If you're a contractor under CIS you'll need to register with them before you take on your first subcontractor.
CIS uses special definitions of the terms contractor and subcontractor. So HMRC might treat you as a contractor who needs to register even if you don't normally think of yourself as one.
You can register as a contractor by:
- registering as a new employer by email through HMRC's website
- calling HMRC's New Employers Helpline on Tel 0845 607 0143 (open from 8.00 am to 8.00 pm, Monday to Friday and 8.00 am to 5.00 pm Saturday and Sunday)
- if you're a non UK-resident business, contacting HMRC's Centre for Non-Residents on Tel +44 151 210 222
If you register through HMRC's website you'll need to put in some details online. The details you'll need depend on the type of business you're registering. But they'll include things like:
- your unique taxpayer's reference
- key individuals' National Insurance numbers
- the registered business name and contact details
Tick the box to show you're going to be engaging construction industry subcontractors. When you submit the online form details will be emailed to HMRC securely.
What happens next?
HMRC will set up a contractor scheme for your business - and a PAYE (Pay As you Earn) scheme if you asked for one - and send you a contractor's pack. The pack contains all the information and forms you'll need to start working as a CIS contractor.
Register online as a new employer and/or contractor
Check if you're a contractor or subcontractor under the CIS
Decide if your work comes within CIS
Find out what to do if you're a non-resident contractor working in the UK
Top
Checking subcontractors' employment status and verifying them
Before you can pay an individual for work they do under CIS, you'll need to confirm they're properly self-employed and not an employee. You may also need to verify them with HMRC.
Checking employment status
CIS only covers self-employed workers - it doesn't cover employees. So before you pay an individual under CIS you'll need to make sure you haven't engaged them under a 'contract of employment'. Employment status is covered by general law and depends on the terms of your agreement with the worker.
HMRC has guidance on employment status and a status indicator tool you can use on their website.
Edited at 17 Jan 2011 12:06 AM GMT
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This is a fascinating thread and I totally agree with Sarah that CIS and construction industry generally is a bit of a minefield.
With regards the 'illegal or not' area of paying a sub-contractor who has not been verified through HMRC system, again Sarah is right, it is not simply a matter of deducting 30% and thats OK.
If the verification returns 'not verified' it effectively means the revenue has no record of this subcontractor being registered and therefore you cannot pay him under the CIS system. The subcontractor has to contact HMRC to register and/or clarify his situation to the contractor. There is a monthly return of CIS payments and they include the subcontractors details and verification number, so if he does not exist as far as HMRC are concerned, his payments cannot be included on that return and if you have deducted tax under CIS your and their records would be incorrect.
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HI all
i would like to thank you all for your feed back on this matter and most of all to Serah i did not think this feed would get so much attention but if i had not posted this feed i myself would not have known what questions to ask the client when i meet him.
and ask to see all the papper work he has from HMRC to show me that all his Sub-Contractors are on the right scheme as pointed out by Tony and that the client is acting legally . And by puting this feed on my help other members that my come across this for the first time like myself .
Martyn
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I'm not letting this one go until it can be pointed out to me why they are working illegally.
According to the bit below from the HMRC website it would appear they can be paid if they aren't registered or can't be verified. HMRC issue the contractor with a special number for the return.
Paying subcontractors
When HMRC verify a subcontractor, they'll tell you how to pay them. This could be:
- gross - meaning you don't make any deductions
- net of deductions at the standard rate (20 per cent)
- net of deductions at the higher rate (30 per cent), because the subcontractor isn't registered or couldn't be verified for some other reason
EDIT : I can be extremely stubborn at times when I believe I am right. If there is a doubt on my part I will stay out an argument but when I think I'm right I won't give up until proven wrong.
Edited at 17 Jan 2011 11:16 AM GMT
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Hi Peasie
I understand you want clarification, and the CIS has a long list of rules regarding employment as well which is a minefield and all those rules have to read and taken in together. Whilst I happy to try and help on a forum . I will never give advice whether someone is working legally or not as explain this is not my expertise. You will need to check with the HM regarding a sceranio and give them all the details of the sceranio in order to try and get an answer . As explained it is the HM that would judge on case my case.
I think if you would like this topic to be discussed in further detail. I would recommend you to contact the ICB. I am hoping that they may do a posting later on.
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Serah
What have you and i started  from small acorns lol
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Hi all - just have to put my penny's worth in here having worked in the construction industry accounts for several years.
Love the new system, so much simpler to complete and puts the onus on Contractor to ensure the tax is paid :-) This has helped the subbies and their bookkeepers stay on the right side of the tax man.
Nautica = remember tax is deducted after materials if CIS20% or 30%.
Peasie = The 'illegal' word can be justified by Sarah - under the previous CIS system tax evasion was relatively easily achieved. Even under the new system I have witnessed the odd one or two 'sub-contractors' looking for work and wanting to be paid cash without giving us an invoice. A good contractor will chase them as we always did but I did come across Contractors who would pay them cash in hand - its tax evasion pure and simple and it does still go on.
And yes - if you intend working for a contractor you should register even if it is only one job simply because most subbies would prefer the 30% not taken off their payment!
The whole reason for the CIS scheme is to prevent tax evasion and whether you like it or not it was rife.
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Just as a p.s. :
Any queries give the HMRC CIS Helpline a bell - they are great
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Hi Liz great to hear from you from what i can make out so far from this client is that he him self gets the contract . and supplies all the materials so his sub - cons only provide the labour so now i am thinking are they sub -cons or just casual labour working as selemployed
Martyn
Edited at 17 Jan 2011 12:51 PM GMT
Edited at 17 Jan 2011 01:01 PM GMT
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I have still to see proof that you are working illegally for a contractor if you are not registered. The verifying stage comes before payment, not before they start working, does it not?
I've come across posts on the internet when the argument just seems to be about the wording and is a waste of time. If my post comes across like this then let me know. But I happen to think it is important to get this clarified for anyone coming across this thread at a later stage.
If they demanded payment without any deduction (when they were not registered) then that would be illegal.
>>>>>>
If you don’t register for CIS before you start work
If you don’t register for CIS before you start work, HMRC will tell your contractors to take much higher deductions than usual from your payments. So, make sure you register before you start.
>>>>>>
It does not say it is illegal to work if you are not registered.
On this thread I think I have turned into one of those pedants I so despise on the internet.
About this forum - so annoying when you hit the return key it takes you to the top of your post and you have to scroll down to get to where you left off. Ok, if you start typing again it will be where you left off but it is an annoying quirk of this forum. I have it at maximum view zoom.
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Hi Peasin
Well i for one have no idea but am looking forward to getting the answer as you are i did not know what a can of worms i would be opening with this freed 
Martyn
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Hi Peasie
CIS is a minefield, and it is pretty clear there are difference of opinion. I am glad that Martyn has brought up this topic . And I am happy that we are having a open discussion.
We actually asked to HM to come to my clients office to explain why they were not excepting returns. They were quite clear that we could not pay someone untill they had been verified and registered and that is why the returns were not excepted and the fines had to be paid.
I do agree with you about having this clarified. I was hoping the ICB would have made a post by now. Even it is just to say, that this issue will have to be looked at in the more detail. I still think Martyn needed to be made aware that there was more to CIS.
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Peasie = Sorry peasie - obviously I wasn't clear enough - I'll try again
Tax Evasion is illegal.
It is not illegal to not register for the CIS scheme, it's just a better idea as very few subbies are happy having their payment reduced by an extra 10% or even 30% is it turns out he/she has been really good at keeping up to date with their tax payments and it turns out they could have been Gross.
It is illegal to not pay tax.
The assumption within the industry is when a subbie asks for cash in hand and does not submit an invoice for works he/she is attempting to avoid paying tax which is equal to tax evasion which is illegal.
I should add that registering for the CIS Scheme and registering for Self Employment is different - It is illegal to not register for self employment!
Self Employment registration is where we get the subbie's Unique Tax Reference and National Insurance number from - if they haven't registered for that then they are evading tax and it is illegal.
Edited at 17 Jan 2011 01:39 PM GMT
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Testing replying to a post via email. Just to take it off topic a little.....you mention in the edit about registering for Self Employment. I see many posts on this subject on the internet and 99% of them say you must register within three months. I was sure I read somewhere that this was no longer the case and you had to register immediately. Do you know which it is, 3 months or immediately. I really should bookmark verified posts when I have a memory as bad as mine.
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www.hmrc.gov.uk/sa/self-emp.htm
states that if you become self employed you must register immediatley otherwise you may be liable to penalty.
- sorry folks - nine times out of time I've found the HMRC website and helplines to be great and at least we can quote it if they tap at our door
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Sorry Peasie
could not get the Email to go but i think it is sill 3 months
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I'm really confused ?!?!
When I have tried to verify a subcontractor who hasn't yet registered for CIS the helpline has allways told me to deduct tax at 30% and still include them on the monthly returns?
That seems to be at odds with Liz's and Sarah's experience?
Edit:
The CIS helpline has never said to my client they shouldn't be paying them and the returns have been accepted without a verification number for the appropriate "subbie"
Edited at 17 Jan 2011 02:16 PM GMT
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Dont be confused .... as mentioned in my previous post :
must be registered as self employed
dont have to be CIS registered, the HMRC will sort that out themselves with Subbie
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Hi Tony
This is why we invited the Hm to my clients office , as the CIS helpline where saying one thing and whenever to try to submit a return online with no verification number , it would not submit , hence the fines. We had to take photo shots of our computer doing the return as strangely enough you cannot print their messages eventually got a computer with a snipping tool to prove it to them.
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Liz D said:
“Just as a p.s. :
Any queries give the HMRC CIS Helpline a bell - they are great”
Thanks everyone especaially liz D you have made me aware of something that i had wondered about. I am still a student and i find it amazing just what you need to be aware of.
As they say ask it doesn't hurt
Thanks you all helped to confuse me then cleared it all again if you see what i mean.
Its true you learn something new eveyday
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sarahsaid:
“Hi Martyn
I hope this helps, but I think you need to be very careful providing work on an area you seem unsure of to without letting your client know.
I only say this because of the wording of your question and entering to the 6000's for cis subcontractors account , this would be the code for the P&L account as part of direct costs if your client was the "contractor". It would be the 4000's code that you would use for your clients income and not a cost code. I hope I can explain how the system works , as it might make it easier for you to understand the entries and the whole CIS system. I hope this helps
I am presuming your client is the subcontractor and not the contractor from reading the question.
(This assumption was wrong by me but it all still applies .Martyn's client is the " the Contractor" .) and I have fixed accordingly
1) Your client subcontractors need to Invoice your client " the contractor" the full amount with no tax deductions mention on the invoice , this is a common mistake which causes a subcontractor to have more tax deducted at source .
2) The subcontractors to your client must break down his invoice into separate amounts including vat if he is registered , by the amount for materials and the amount for labour , the reason for this depending his verification as to whether he is Net standard rate or Net Higher rate, he or she will only be taxed at source on his labour element of the invoice.
The Subcontractors must provide your client the contractor a CIS Card and their UTR Number to the HM. The Construction Industry Scheme (CIS) card is a necessary plastic card that allows you to work legally as a self-employed construction worker in the United Kingdom. The card, which is issued only by the HM Revenue and Customs , displays his name and occupation. The CIS established a set of rules for how payments to subcontractors for construction works must be handled by contractors in the industry, according to the HM Revenue & Customs website. Without your CIS card, you are illegally working, which could result into jail time or criminal fines.
The Contractors duties to the subcontractor
The contractor is by law required to issue your subcontractor with a Subcontractors Statement for payments paid to your subcontractor for between the 6th and 5th of each month.
The Statement will show how much in that month your client has been paid for labour and and materials and also exactly how much tax has been taken at source for that period.
The contractor is then obliged by law to send a CIS return to the HM Revenue by the 19th of each month and pay the HM all the CIS tax they have deducted from the subcontractors .
The Accounting Bookkeeping entries
There are a couple of scenarios you could use . As you have not mention in your question whether there is retention usually 5 to 15% depending on the building firm is involved or whether you entering by Bank payments or Creditors . I will presume your are entering using bank receipts ,if not let me know and I show you to cover them for creditors in sage and what happens if you have retention involved.
Edited at 16 Jan 2011 07:41 PM GMT”
What is the best way to input the 5% retention witheld from sub contractors in the SAGE CIS module, then i am wanting to release 2.5% when job complete and a further 2.5% after 12 month.
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