CIS Liability Chart of Accounts in Quickbooks and VAT

CIS and VAT

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Hi, I sincerely hope that someone out there can give me some help regarding CIS Liability in Quickbooks.

I set up a Chart of Account for CIS Liability under Cash in Hand about 6 months ago as I use Sub-Contractors. All worked well.....UNTIL I became voluntary VAT registered on 1st Sept.

Quickbooks online appear to think that the CIS Liability should deduct 20% VAT from the CIS amount.  Unfortunately, as many of us know, Quickbooks do not account for CIS.  I followed the advice of several online blogs and set up the Chart of Account section for CIS Liability.

BUT - The VAT Report is showing that the CIS Liability element has a reduction of 20% VAT.  Though the Chart of Accounts/CIS Liability has NO VAT assigned to it.  I understand that the information is probably assigned to the fact that it is a payment from the Invoice associated to the sub-contractor.  So I am assuming the Chart of Accounts section for CIS Liability is set up incorrectly - BUT I don't know how to change it and Quickbooks won't help me - nor will my accountant!

Does anyone out there know how I should get around this conundrum? ..Please.

Thanks in much anticipation.

Replies (8)

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By jpcentral
30th Sep 2016 08:16

Sounds like you've really got your knickers in a twist. I've never read the online blogs you refer to but stick to our own method, which doesn't sound too dissimilar.

We have "CIS Liability" as a bank account. You imply you have it as a "Cash" account which will do just as well.

Presumably you receive an invoice from your subcontractor. This will say, for example, - Work carried out £500. I'm assuming there is nothing complicated such as materials.

This is entered in the normal way as a Bill and the VAT status entered on the Bill. This may be standard rate, zero rated, 5% or not registered depending on the contract and the work being carried out.

This Bill will appear in your Accounts Payable Report.

Now you pay it using "Pay Bills". Pay the amount deducted using the CIS Liability bank or cash account mentioned above. In the example above this will probably be £100 (unless subbie is verified at 30% or Nil).

Pay the balance in the normal way, presumably either bank or cash.

The Bill is now cleared and there is a balance in the CIS Liability account. When you pay HMRC, you can either write a cheque from whichever bank account you pay from and analyse it to the CIS Liability account or you can do a transfer between accounts.

It is actually pretty straightforward.

Thanks (1)
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By kalis
30th Sep 2016 08:30

Thank you so much for your answer jpcentral.
This is exactly the way I do it in Quickbooks.

But, when I go to my VAT report it tells me that the CIS amount has 20% VAT reduction on it. So say CIS amount is £120 on a sub-contractors Invoice, the VAT Report shows £100 and then £20 VAT. Then when I go to the VAT in Chart of Accounts it shows the full CIS amount to pay to HMRC.
Is it correct that VAT is accounted for in the CIS amount?

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Replying to kalis:
Teignmouth
By Paul Scholes
30th Sep 2016 08:37

Hi kalis - this may be a silly comment but does this have anything to do with the CIS deduction being 20%? In such a case the CIS sum will be the same as the VAT sum.

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By jpcentral
30th Sep 2016 08:35

Are you using Cash VAT?

It would be correct on a Cash VAT basis because the VAT is calculated when you make/receive payment.

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By jpcentral
30th Sep 2016 08:38

Meant to add that it would be correct for Cash VAT if the subcontractor was VAT registered.

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By kalis
30th Sep 2016 08:51

Hi jpcentral
Yes, I am using Cash VAT and yes the sub-contractor is VAT registered.
and Hi Paul, Yes, the sum is the same as the VAT amount - both being 20%

Thank you both so much for your comments. If I understand correctly then what is being reported in Quickbooks for VAT is actually correct and I have been worrying over nothing :)

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Replying to kalis:
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By Manchester_man
30th Sep 2016 09:28

kalis wrote:

Hi jpcentral
Yes, I am using Cash VAT and yes the sub-contractor is VAT registered.
and Hi Paul, Yes, the sum is the same as the VAT amount - both being 20%

Thank you both so much for your comments. If I understand correctly then what is being reported in Quickbooks for VAT is actually correct and I have been worrying over nothing :)

Sounds that way to me.
Remember, life is too short for worrying, especially when you are paying an accountant.
Was the accountant just not interested or is it the case that he was saying there's nothing wrong?

If the former, perhaps it's time to move to pastures new!

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Replying to kalis:
Teignmouth
By Paul Scholes
30th Sep 2016 14:59

I always find that, if you're going to worry, it's better if it's over nothing!

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