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CIS Accounting treatment for sole trader

How should CIS be accounted for, for a sole trader

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Hello Accountingweb community,

 

I have recently taken on the books of a sole trader (electrician) who operates both as a sub-contractor and a contractor.

1) As a contractor, he correctly deducts 20% (or the appropriate rate following verification) from the subby invoices he receives/pays, and then declares the cash payments in the 6th-5th month period and pays over to HMRC. All ok so far.

2) As a sub-contractor he raises his invoices to the contractor and receives payment net of 20%, which I understand is added to his self-assessment at the year end where any under/over payment of tax/NI is calculated.

When posting the CIS suffered by the Contractor, what is the correct posting?

Currently he is running a balance sheet account within debtors, building up this CIS balance for example.

Cr Sales invoice £100

Dr Aged Receivables £100

Payment received of £80 (£100 less £20)

Dr Bank £80

Dr CIS suffered £20

Cr Aged Debtors £100

Is this correct? 

Is so, fast forward to year end and what is the other side of the accounting entry to Credit CIS suffered £20, Debit ???

Thanks in advance.

Daniel

 

 

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By jcace
22nd Mar 2018 12:02

Income tax paid

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