Forum

• # 108959
• Tue 02 Jun 2015 05:47 PM

Hi,

I have recently taken over as head of accounts for a small company, the Sage program is behind by about two months regarding certain transactions. I am playing catch up and getting no where fast. The company operates VAT cash accounting. I have a back log of customer receipts to process these have retentions held back on them. I can't make out how customer receipts have been previously recorded. There is a retention account that has no transactions in it and I know that there is quite a lot of retention for the business. I am assuming that these receipts have somehow been recorded with a payment on account or as a credit possibly both. It's a right mess.

I'm looking for some guidance on how best to post the retention from now on.

Heeeeellllllp.

• 
  Quote
  

• # 108965
• Wed 03 Jun 2015 09:41 AM

Julie,

For some guidance have a look at the following from HMRC: http://www.hmrc.gov.uk/manuals/bimmanual/bim51520.htm 

Does the company's sales invoice cover the full contract value and they get paid it less the retention or is the sales invoice for the contract value less retention? Either method seems to be acceptable to HMRC so the next step is how to deal with the bookkeeping.

In the former case, full value invoice, the payment would be offset against the relevant invoice leaving a residual value (the retention). This due amount will sit on the account and act as a reminder. As your company is on VAT cash accounting it will not distort the VAT payments to HMRC. After the retention period is over, you would chase the retention. If it is paid, VAT will be due and dealt with as normal under VAT cash accounting. The down side is that the retention will form part of the profit and is therefore taxed in the year of the invoice whereas it is only realised in the year of payment. If the retenion does not get paid, it should be written off in due course.

In the latter case, invoiced at full value less retention, payment will fully offset the invoice. There is no residual value acting as a reminder of retention due. It is imperative to then keep a list of retentions due, with dates when due, and invoice these on due date. Practically I would always chase the payment to be fairly certain that payment will be forthcoming before invoicing the retention. 

I assume that CIS is not also involved so have not mentioned it in my response.

Paul

• 
  Quote
  

• # 109021
• Mon 08 Jun 2015 05:14 PM

Hi Paul,

Sorry for the delay in replying. Have been on a quick break. Thanks very much for the guidance. I can carry on with confidence now. Once again thank you

• 
  Quote
  

• # 109094
• Fri 12 Jun 2015 02:37 PM

Hi Julie,

Just as an aside you didn't mention whether invoices were being raised or whether contracts were undertaken on a self billing basis and therefore only applications for payment are being made.

Either way one thing you may wish to look at is a program called Construction Manager from JNC which is a front end bolt on for Sage from a Sage Software Developer. We have used it for many years as at that time Sage wasn't very good for handling costs against projects and keeping track of CIS payments and deductions, and retentions and applications for payment.

The programme allows you to put through your application and takes into account any retention monies, variations and CIS monies in a simple straight forward manner. Furthermore it allows electronic submission and veriication of sub-contractors and CIS returns.

Monies received are entered with the retention monies record being held in Constr Manager rather than complicating Sage with outstanding debts that may never be received and therefore require writing off.

I hope this helps.

Kind regards,

Graham

• 
  Quote