I have a new CIS client who has been deducting CIS from his subcontractors but then also pays their travel costs with no deductions.
Ignoring VAT, if the invoiced amount from the subcontractor was £1,000, the contractor correctly deducted the £200 and paid this to HMRC. Also in the same period they then paid £500 worth of travel costs and deducted nothing.
What do I report in respect of the £500:
1. £500 gross and £100 CIS should have been deducted.
2. Gross up the £500 to £625 and report £125 worth of CIS.
3. Something completely different.
Thank you for any help.