CIS invoices in Sage Instant Accounts | AccountingWEB

CIS invoices in Sage Instant Accounts

I have a client using Instant Accounts and has a customer that is a contractor, and CIS is deducted at 20%.

I have a couple of ideas but has anyone found a neat way of producing an invoice showing the tax deduction, and posting the tax liability to a new nominal account, say 2212?


CIS Invoicing and Receipting Payment

sarah douglas | | Permalink

 Hi Dave 

I maybe wrong but I think want you are trying to do will also have the effect of reducing  your Turnover figure in your Profit and Loss when you post your invoice . One of my clients Invoices  to contractors and also pays a number of subcontractors invoices, and this is what we do. 

All their Contractors also give them a full invoice for their records 

The Invoice that is sent to the Contractor is for the full amount not less the 20% as more often then not . they enter the bottom figure and then reduce the tax which would then leave your customer short . the Customer (Contractor needs the full invoice so that he can claim it in his Profit and loss. 

When they  enter your invoice on to their system as the full amount, they wiil have an accounts system set up that will reduce your tax and prepare your Contractors Statement for the month .  You could put your UTR Number and make it clear you are a contractor but they should have you set up in their system as they have to verify you wth the HM to work out whether they should be taxing you at 20% or 30%.

If you try to reduce your total Invoice , you will also be reducing your Turnover. 

1) When the money is paid we match the amount less the 20% against the relevant invoice.

2) We have then sent up a temporary Bank Account 1260 and Named it CIS Tax Suffered 

3) Using the Bank account 1260 we now receipt the Balance of the tax reduced to this Bank which has the effect of been a debit balance which you then do a payment on the 5th of each month to 2210 reducing your monthly PAYE & NI  payment to HM .

3) In the COA we have set it up  so the Bank account is separate in your Current Assets called CIS Suffered 

I hope this of some help . We have been trying for ages to show it on the invoice but no matter it always reduced the turnover.

Kind Regards Sarah @ Douglas Accountancy & Bookkeeping Services 

Witch-Queen's picture

Sub Contractors and Sage

Witch-Queen | | Permalink

Although I understand the points made by Sarah, and her method of dealing with this, I have found a much simpler method which follows.

1) Create a new Nominal 2211 named Sub Contractors Deductions

2) Raise your customer invoice for the full amount, clearly seperating Materials and Labour. (The CIS Tax is only deductable on the Labour) You should never deduct the Tax at your end. The Customer must do it their end. The must also pay the full amount of VAT as invoiced to them.

3) When the customer pays they should give you a Sub Contractors Deduction Certificate or show the Tax deducted on their remittance. Use this to post a Credit Note to the customers account, dated the date of the payment, using the new nominal 2211, for the amount of Tax deducted using Tax Code T9 (You don't need to do this in Invoicing as a hardcopy is not required, so do it as a Batch Credit in the Customers Module and it will take only a few seconds)

4) Post the payment to the customers account remembering to 'pay in full' on the credit note first, and clear off the invoices being paid. The payment will balance and the invoices will be cleared in full.

5) Nominal 2211 now becomes a running total of the CIS that needs to be claimed back from HMRC. When you make the payment to HMRC, having deducted the CIS from the payment, do a quick journal to move the amount of CIS claimed for the period from 2211 to 2210 so that 2211 now only shows the CIS still to be claimed back.

I've used this method for years and it works perfectly and 2211 becomes a record of all CIS transactions.

Any questions, as always, my email is [email protected] and I will reply with a phone number so you can talk it over with me if you need to.

-- Witch-Queen

Good point Witch Queen

sarah douglas | | Permalink

 We actually sort of do both, I am not sure about the whole of the UK  but in Scotland it is very common for the big Subcontractors to also hold 5 to 20% retention on large contracts which is usually payable on 6 months after completion which adds to this nightmare of CIS and we have it coming from both sides .  We are very often left short so we like to be able to send a full statements for the shortfall.

Just to add to the confusion.   You are absolutely right about showing the labour and materials separate.

Kind regards Sarah @ Douglas Accountancy & Bookkeeping Services

Thank you girls...

Yonder Dave | | Permalink

... I was hoping one or both of you had come across this one, and your suggestions fit with what I had in mind.

When I enter payments to subcontractors I have found the easiest way is to enter a bank payment for the labour and materials and then a bank receipt for the tax withheld, posted to a separate Nom Code 2212. The only drawback is two entries on the bank rec. (We use Moneysoft to process CIS and produce the Subcontractors Certificates.)

If I was just posting the receipts from a contractor I think I would use the same method (i.e. bank receipt and payment for the tax) but in this case the client is producing the invoices and posting the receipts so he can keep up to date with his credit control between my monthly visits.

With the limitations of invoicing in Instant (and Sage 50 for that matter) I think the best way is if the client produces the invoices gross and I will have to enter a credit note to the Nom Code "CIS Suffered" if he can't get the hang of it.

PS I'm glad us Sassenachs don't have the retentions to deal with.

Thanks again, Yonder Dave

Annepebo's picture

CIS and Retentions

Annepebo | | Permalink

I am relatively new to Line 50, - I was never a fan as I used the old Sage line 100 and subsequently Sage MMS which I was about to upgrade to Line 200.  I preferred the closed periods of the bigger systems.  I recently decided to 'go freelance' and as I'm now dealing with much smaller enterprises Line 50 seems to be used widely and I've become more used to it and am finding on the whole it does everything reasonably efficiently.  I also use Sage Instant and quite a few other systems too, although not for contracting businesses.

I too use moneysoft for payroll and subcontracor payments, I also use the credit note approach for both payments to sub contractors and receipts from contractors, and find it works well using two seperate nominal accounts 2212 and 2213 (I guess you could use just the one account if you refer). The amount of CIS suffered can then be entered in Moneysoft payroll so that you can reconcile the value in both due to HMRC each month.  Although the end result would be the same I prefer not to use a bank account as there is no actual receipt of funds for the CIS deduction.

Almost every contractor I have come accross, which is most of the major builders, deduct a retention of around 5%.  This is deducted prior to VAT and many contractors operate self billing system which means it is only the VAT on the amount after retention that is due and the tax point is usually the payment date.  In most cases an application for payment would be issued by the subcontractor and an invoice raised once the work has been agreed - certified. 

If you post the gross figure of the 'invoice' then you will be left with the retention value on the account.  Be carefull too with the VAT on the retention especially in self billing situations. Many of my contractors are volume new house builders and therefore the retention values can be numerous and continue over a period of months or even years, in this case I post each deduction for retention to a seperate customer account (usually the same code but with a 'R' suffix).  I find it is essential on long running contracts to keep track of the retention as invariably you have to chase up the release of payment.  

I have never tried Sage Construct with Line 50, it may make the whole process so much easier -  has anyone any experience and is it worthwhile ? 


Sage CIS Construction Module

sarah douglas | | Permalink


We use the CIS Construction Module and yes I think it is worth every penny . But is more useful if you are a contractor . .The great thing about it links with your creditors and your accounts system.  

With regards to the retentions we keep from the subcontractor we we enter the total in the two Parts of example 

1st part of the Invoice is S100

2nd Part of the Retention is R100 which is the 5% which adds to the total invoice.

As you rightly point out with contracts going on for a long time this is a must. 

It also means that are creditors are correct. a

In Scotland  the major Builders as you rightly point out do self billing,  but when you have public contracts or projects running at over 250000 , with other Contractors taking part for other parts of the project .

This is where all the Wrangling starts.  We know they do self billing , but that does not stop us sending them the bill for work completed from the company ,  we need to know what they still owe us for the work we have completed.  

As when you get nearer to the final payment , this is now where the debate starts as to whether you as the contractor held the project up hence costing the other contractor more money on scaffolding for example, which CIS Contractor cause what delay.  Did the scaffolding company hold the project.  Did the clark of works in the council hold the project back.  

This is just a personnel view but if you don't decide what your bill is , when it comes to the end of project it is who has the best records in both the accounts and the administration side.  

When we enter our CIS payments the system it will work out the tax and shows whether it is a a gross payment or Net payment with regards to the Materials and Labour element.

It does the posting to the relevant tax account , 

CIS module also allows you to complete all the verifying of your subcontractors and whether they will lower or higher rate tax or Gross payments. It is for the HM to decide I have wondered on a couple of the CIS threads as people just seem to talk about 20% deduction .

Once you have completed your payments and invoices the CIS module allows you to do your CIS Return is really very good , especially if you have contractors.

My Client and myself find it full proof it really does not let you make mistakes, in fact unless you have done all the requirements it really does not let you go any further.  This can be annoying but it does force you to set up your CIS system correctly . It allows you to do your returns online from the Sage system and produces the Certificates required after the return is done.

-- Sarah@ Douglas Accountancy & Bookkeeping Services, Glasgow

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