CIS payments on VAT return? | AccountingWEB

CIS payments on VAT return?

Does anyone know whether payments made to subcontractors should be on a VAT return or not.  The subcontractor is not VAT registered, so there is no VAT.  I understand subcontractors are considered self-employed so it would be the subcontractor who would be required to account for the VAT and therefore if there isn't any VAT on the invoice, it shouldn't go on the VAT return.  HMRC have advised client that it should go on VAT return even though no VAT on the invoice?

Any thoughts?


the strict answer

Anonymous | | Permalink

yes it is a purchase of an item that would be VATable if your subcontractor were VAT registered.

box 7

Anonymous | | Permalink

No vat involved just enter in box 7.

jimeth's picture


jimeth | | Permalink

The fact that this is a subcontractor is irrelevant - the answer would be exactly the same as for any other supply to your client that is within the scope of VAT (whether the subcontractor/supplier is VAT registered or not).

(BeakerVAT - I tried to answer your private  message to me on this subject earlier - but your profile is set not to receive private messages so it was impossible to reply).

Agree with Box 7

Anonymous | | Permalink

If payment made to unregistered sub-contractor no VAT for box 4 but include payment in box 7.

Outside the scope

Anonymous | | Permalink

From HMRC website on "VAT Rates Explained": -

Goods and services that are outside the scope of UK VAT includes anything you:

  • sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered

If they're outside then they shouldn't go on the VAT Return, should they? Isn't that what outside means?

Or, have I missed something here?

Strictly, no "payments" should go on the VAT return anyway.


tltodman | | Permalink

Strictly, no "payments" should go on the VAT return anyway.

Posted by Anonymous on Fri, 16/04/2010 - 16:14

Unless you're cash accounting of course!

And agree with previous replies - invoice amt/pymt should go in box 7.



I wouldn't include it.

Anonymous | | Permalink

I would not include payments to a subcontractor unless he was VAT Registered as I would not if it had been rates, wages or interest.

Maybe a VAT expert could let us know who is correct.

It should be included

tom2another | | Permalink

Payments to subcontractors are the same as to any service supllier (- like what accountants are!)

Whether he is registered or not is irrelevant, except as to if there is any input tax to reclaim.

The supply is VAT able (except in certain circumstances but even then its at zero rate) even if he is not registered.

Do not be fooled because you think its like wages - it is not - he is self employed and its a supply of services (which he should invoice for!)


It Must Be Included

nordic | | Permalink

We make payments to sub-contractors some of which are not VAT registered, and some who are, and this makes no difference. They both appear on the VAT return either as a Vatable purchase, or zero rated.

Include all purchases

tonyarm | | Permalink

HMRC 700/12 says:

"5.7 Box 7

Put in box 7 your total purchases/inputs excluding any VAT."

You have to include all purchases of the business whether or not the supplier was vat registered.  It is the net amount after deducting vat, if any.  A rule of thumb is that if the purchase/expense would have had vat on it if they had been registered then you should include it in Box 7.

Exempt ???

Anonymous | | Permalink

It is unlikely that supply of services by subcontractors under CIS would be exempt - they would normally be either standard rated or zero rated (new build) - if a supplier (of services or goods) is not registered it does not make the type of supply exempt.  Exempt supplies are specific and detailed by HMRC and include insurance, rates etc.  Paying wages under PAYE does not involve a supply and is therefore not even part of the VAT regime - why payment of wages has been mentioned in a disussion about VAT is a little off the subject.


tonyarm | | Permalink

Further to my previous post, it would be more accurate to have said that the expense should be included if it would be regarded as a "taxable supply" to the supplier/provider of the supply. This includes zero rated as well as standard rated.

RichardWhight's picture

More Info please

RichardWhight | | Permalink

No mention of applications, certifications, self billing, authenticated tax receipts here. Wouldn't these make a difference? Also if retention has been deducted and if there's MCD involved.

If they're a non-vatable subbie and you give them money but they have not been certified then do you put it on the VAT Return? Personally I'd say no.

What kind of arrangement have you got here? What kind of CIS are they? Are you cash accounting (thanks to tltodman)

More information would lead to better answers.


tom2another | | Permalink


Beakervat asked the question and got a reply to the question he asked, in fact quite a lot of replies.

Are you now asking a different question?

"No mention of applications, certifications, self billing, authenticated tax receipts here. Wouldn't these make a difference? Also if retention has been deducted and if there's MCD involved"

The answers the same, it goes on the VAT return.

The rest is just down to the mechanics of cash accounting or not as to the timing, and the CIS is irrelevent for VAT.

"If they're a non-vatable subbie and you give them money but they have not been certified then do you put it on the VAT Return? Personally I'd say no."

Personaly, you'd better not be somebodies accountant or book-keeper who is in the construction industry!

Or  are you just bored on a Friday afternoon?



Outside the scope

alanhone | | Permalink

I thought I understood the answers, until I checked the HMRC website (Not infallible, but a start)

Onthe VAT return, quote:

Box 7: your total purchases excluding VAT
Enter the total figure for your purchases (excluding VAT) for the period, including:

•the purchases on which you paid the VAT you put in box 4
•anything you bought that the reverse charge procedure applies to
•any amount you put in box 9
Don't include:

•expenses like salaries and taxes
•anything outside the scope of VAT like vehicle licences, MOT certificates and local authority rates

Note the last line.

Then read:

Goods and services that are outside the scope of UK VAT includes anything you:

•sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered

This means that the Non-VAT subbie does not go on the VAT return, as I now understand it.  This is at variance to the HMRC advice to the OP's client, so it's probably correct!




Anonymous | | Permalink

The HMRC comment quoted refers to the person making the supply (ie the subbie) being unregistered (possibly just for a period) and there is therefore no output tax on those supplies. But the client here is the customer and is therefore declaring input and not output tax and is registered, so the reference is irrelevant.  I think your confusing the fact that taxable supplies are taxablie for VAT irrelevant of whether you're registered or not - or for any period that you are not, the fact that you are registered requires you to complete the return   !!!!!!!!!!!!!

RebeccaBenneyworth's picture

A bit of perspective

RebeccaBenneyworth | | Permalink

Boxes 6 and 7 on the VAT return are designed to give a computerised reality check to the return, and are therefore used to trigger compliance checks if any out of range data in relation both to the trader and his sector pop up. An example would be a trader with very low recovery of input tax in relation to box 7 suddenly recovers almost 17.5% - which might be due to a very large VATable purchase in one quarter. It is a bit of a blunt instrument as a compliance technique so will only raise alarms when things go very wrong.

The next point to consider is that the VAT return attacts a penalty if there is an inaacuracy on it leading to an underpayment of tax and that accuracy arises otherwise than by the exercise of reasonable care in preparing the return.

So in reality whatever you put in box 7 can never trigger a penalty. However, I would advise a client that the failure to take care over box 7 entries might weigh in the assessment of reasonable care if there were an error in box 5 - so don't just stick down any number. The risk of compliance trigger is also relevant in part.

In summary - do your best but don't sweat it. For the record (not checking HMRC's guidance, but as a VAT lecturer) my view is that you exclude things that are "not a supply" within the meaning of VAT from box 7 so I differ slightly from some of the above answers. I would exclude non business transactions, wages, loan repayments (capital), dividends ...that's the main ones.

DMGbus's picture

VAT notice 700/12

DMGbus | | Permalink

Based on the following extract subcontractors WOULD be included... 

Leave out:


VAT itselfwages and salaries

PAYE and National Insurance contributions

money put into and taken out of the business by you

loans, dividends, and gifts of money

insurance claims

Stock Exchange dealings (unless you are a financial institution)

MOT certificates

motor vehicle licence duty

Local Authority rates and

consideration for a supply.

You should:

income which is outside the scope of VAT because it is not

show net figures after taking off any credits

treat discounts as described in Notice 700 The VAT Guide

if you use the cash accounting scheme, base your figures on


payments made and received, not invoices issued or received.      


5.8 Things to remember when completing

boxes 6 and 7

Just for my information

Anonymous | | Permalink

Hi Tom

If you are accounting under the rules of Applications and Certifications then  the VAT point is on Certification and not on application. Also if Retention and MCD is involved then these are deducted before VAT is calculated on the Certification.

So is a payment on account before the point of supply and certification VATable?


when VATable

tom2another | | Permalink

Hi Rich

If you make a payment on account, before the supply, either as a deposite or in responce to a proforma invoice or just 'cos the subbie has asked for it, that's all it is, a payment on account.

If you are on cash accounting, then you account for the VAT on the payment when the supply has occured, and you recieve a VAT invoice (if they are not registered, then when the supply has occured.).

If you are not on cash accounting then when the supply has occured and you've got the invoice, then on the whole lot ignoring the on account payment. (If you operate a purchase day book and ledger it just goes on the invoice date or supply date if later).



BeakerVAT | | Permalink

Thanks everyone for your postings though I must confess to being more confused than before.  My original query that stemmed from all this was whether purchases without input VAT (because supplier not VAT registered) should be put on the VAT return.  Is there a compliance check anywhere that states Box 4 should be 17.5% of Box 7 figure.  Because obviously including all purchases, whether or not with VAT would throw this % out.  What is the reason for putting invoices without any VAT to reclaim, through a VAT return?  A VAT return is to reclaim VAT, not an extension of your accounts.

I agree with the interpretation of HMRC that Goods/services o/s scope includes anything you sell when you aren't registered for VAT and don't need to be.  This seems to agree with my thought that an invoice received without VAT does not go on VAT return.




Wrong but won't go to Jail

tonyarm | | Permalink

If you read previous posts (particularly Rebecca's) you will see that 1) you should include any costs that are "taxable supplies" on a vat definition, irrespective of whether or not the supplier is registered, 2) if you don't you won't "go to jail" because Box 7 is for statistical and review purposes and no tax is being lost.  So do what you want but I always advise my clients to do things correctly, and I'd advise you to as well.  I'm surprised this is even in contention. It was one of the first things I learnt when I was first taught about vat.  Box 4 is not meant to be 17.5% of Box 7 and Box 1 is not meant to be 17.5% of Box 6. Of course it might be, depending on the natutre of your business, but it doesn't have to be.

Box 7

Anonymous | | Permalink

As stated previously all invoices that would be VATable or zero rated if the person was registered should be declared in box 7 therefore even supplies from a non registered sub-contractor would be declared in box 7.

If you were using bespoke construction industry software a VAT return feature on the program would have automatically included the payment in the box 7 figure. Remember an unregistered sub-contracror is treated the same as an unregistered supplier.

I have worked in the construction industry for a number of years and within the acoountancy profession before that and would strongly advise that you always follow HMRC advice as failure to do so could lead to incorrect submissions and possible fines.


BeakerVAT | | Permalink

OK great, I will put in Box 7.  Particularly appreciate your experience on CIS.

Appreciate all the comments.

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