Hi - I have seen this topic floating around in many forums through a google search but never a straight answer, and often the questions themselves are very confusing so I'll make this as straight forward as possible
I'm producing the first VAT return for a small construction company, using cash-accounting and the company operates the CIS scheme.
The VAT percentage is 8.5% for the first year.
Say the company raises the following sales invoice and it is paid in the period:
£3,000 Labour
£500 Materials
£3,500 Total
£700 VAT
£4,200 Total invoice amount
-£600 Less 20% CIS on Labour
£3,600 Amount payable
My natural logic would be that when the £3,600 is received, VAT of £306 (8.5% of £3,600) would be owed to the taxman.
However, eventually the revenue pays back the tax that has been suffered, so surely VAT should either be paid on the full invoice amount of £4,200, despite a lesser amount received, or else VAT should be paid on the eventual CIS suffered repayment?
Thanks
Replies (10)
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your conflating
if you receive the 3,600 you have recived and account for the 700 vat - dont try and set off other taxes against one another
Agree
Pretty straightforward.
You pay over the flat rate vat on the gross invoice amount. The fact CIS tax is deducted is inconsequential to the vat treatment
Cash Accounting
This is one situation that you do have to consider the cis tax.
Cash Accounting will show you have received £3600 you then need to add the cis tax and account for vat on this figure. The figure to pay over is £357.
I have seen so many people make the error of only paying vat over on the actual amount received.
.
do think paying tax on the actual amount received seems correct to me.
I don't. Would the legislators really draft their way out of tax take?
You pay VAT on the Gross. A Shirley says, you can think of the CIS part as an IOU equivalent to cash.
Think of it as two receipts
The monetary receipt of £3,600, and the CIS tax credit of £600. Total received £4,200, as per gross invoice.
clarify
you have been deemed to receive £4200, you account on 8.5% of this which is £357. I presume you have clearance for the flat rate scheme (FRS) please note that you cannot use the FRS and cash accounting together , you have to operate the adapted cash accounting scheme for the FRS
No conflict at all
Vat notice 733 deals with flat rate scheme.
Section 9.4 states that where deduction are made then apply the percentage to the amount before the deduction.
It lists a few examples and cis deductions is included in those examples
well it really boils down to whether you have other income
ie if you rented a property out you would have to include the rental income in the the amount subject to the 8.5% calculation. its slightly more complicated than that but thats the genereal idea