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Am I being thick ??????

Am I being thick ??????

After several phone calls to different technical support advisors I am beginning to think I am on a different planet as the two common factors (see below) in question will be applicable to 000's of clients and so must have been addressed by Sage ??

Two factors :

1) registered in the Construction Industry Scheme under net status i.e. 20% deduction
2) VAT cash accounting

Where VAT cash accounting is used, Sage will not allow invoices and credit notes to be allocated to each other unless they are posted with the SAME VAT code.

I am needing an easy solution that is manageable by the client and not an accountant !!

Basically the client needs to account for the 20% CIS that their customer will deduct from the payment.

Under standard VAT accounting this wouldn't be a problem because you could raise a sales invoice with a T1 VAT code and then raise a credit note for the CIS tax with a T9 VAT code. But under VAT cash accounting Sage will not allow the invoice and credit to be allocated because of the different VAT codes.

So then I was told that the workaround was to post a customer receipt for the full amount and then post a bank payment for the CIS tax.

The problem with this is that you send the customer a sales invoice with no record of the CIS tax deduction that they have to make and so you can guarantee that because of this some customers will incorrectly pay the full invoice amount without deducting the CIS tax.

Having then spoken to the report designer team I was told that they had never had this query raised previously.

So can someone please confirm that my client is the ONLY Sage customer operating VAT cash accounting in the Construction Industry Scheme !!!!
Paul Dorrington


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08th Dec 2008 18:01

Here on Earth....
Well, for us, if we part pay a subby invoice, it is not so easy to reconcile (the numbers are not the same). Far better to pay it off in full, yet there is the CIS that needs taking out also. Hence the credit invoice and the sequence we use below.

Maybe it is easy for you to reconcile with your steps, but that is the reason why we finally ended up with doing it this way.

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08th Dec 2008 13:36

Yes you are
Why on earth are you raising credit notes!

Monies recieved part pay the invoice (from the bank account.)

The CIS deduction clears the balance from the (dummy) CIS bank account.

At month end the CIS bank account is used to part pay the PAYE and the balance is paid over to HMRC.

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07th Dec 2008 22:02

Answer is another bank account
Our solution for any bespoke software is far more simple. We set up an additional bank account in the n/l and call it CIS. When a customer pays the net amount, that obviously goes to the normal (real) bank account. The unpaid difference (their cis deduction) is then posted as a pretend bank receipt to the CIS bank account. The CIS bank balances are then transferred to PAYE control accordingly to match up with the PAYE returns.

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07th Dec 2008 21:34

CIS and Sage
Ken's solution is fine for standard VAT but not cash accounting VAT because you need matching T codes in the supplier ledger in order to allocate the invoice to the credit note.

For cash accounting businesses I find it best to do as you describe in your question - ie record the payment as if the invoice were paid in full, then post a bank payment for the CIS tax witheld.

There is no need for you to tell the customer how much tax to deduct -
the contractor should obtain this information from HMRC. You could, if you wish, set up a memo to appear in the text box on the bottom left of the invoice template.

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By Anonymous
06th Dec 2008 11:49

CIS deductions in Sage
After a real struggle trying to get an explanation from Sage Helpline, and some tips from our (Sage-based)accountant, after 2 years of headaches trying to reconcile etc, we finally found this sequence which seems clear and works nicely when later reconciling.

Step-0: Check with CIS that Subbie is verified before making any payment.

Step-1: Supplier > Invoice: Post the supplier(Sub-contractor) invoice as is.

Step-2: Supplier > Credit: Enter a dummy Credit Invoice/Note on that supplier(Sub-contractor) account for the 20% CIS tax deducted from the subbie. Use N/Code 2212, and Tax code T9.

Step-3: Bank > Supplier: Supplier account should show both invoice & credit note. When ready to pay off the subbie’s invoice, pay off the balance (both the original invoice + credit invoice) ie, the invoiced sum less CIS tax.

SAGE: BANK > PAYMENT. Choose bank account, N/C is 2212, details could be: "CIS_5Nov08". Tax is T9

Hope that helps.

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By Anonymous
06th Dec 2008 07:46

VAT on CIS deductions
Sage have not addressed this as you put it because the CIS is part of the receipt and payment processes not the invoicing process.
If the sub-contractor needs to insult his customer by reminding him to deduct tax that could be done by a memo on the invoice.
A credit note would be ignored as an accounting document by the contractor anyway.
However if you insist on creating a credit note you can create the credit note with Tax code 1 but change the amount of VAT to Zero (Needs to be done inside the description tab).
If you process the credit note, you then need to calculate the total CIS deducted in a vat accounting period and add that back to the relevant vat form box if that is strictly necessary

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05th Dec 2008 22:04

No No No
get rid of SAGE (its C£^P) use anything ANYTHING but that pile of steaming xxxx

problem solved as easy as that

ps, best move we ever made, sacked every client on sage, profits went up 200%

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