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Hi everyone
I am fairly new to the whole 'CIS deductions' game and am still trying to get my head around it. I use Solar Accounting Software and, thankfully, they have very useful help files which explain how CIS deductions should be treated. However, I have one client who is a subcontractor for one particular company (I won't mention any names) which apparently has been taken to court on numerous occasions, including by HMRC, for how they operate with regards to their sub contractors.
Their process is as follows:
The subcontactor invoices them for VAT only (not for the actual labour, materials used, VAT and then CIS to be deducted). The contractor then pays the VAT directly into the sub contractors bank account and raises a 'statement of deductions' which states the Gross Pay (this amount is the amount after the VAT has been deducted), the CIS deduction and net pay. The net pay is then paid seperately.
The contractor will not accept any invoices for labour or materials, only for VAT!
Has anyone else come across this way of handling CIS? I can raise an invoice in Solar without VAT for the purposes of recording the gross pay and CIS deducted, and I can also raise a seperate invoice just for the VAT element that actually gets invoiced so that it is shown within the VAT records but it all seems very ominous to me.
Any advice/guidance/opinions would be appreciated.
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