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.