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Should non VAT Subbies invoices show on VAT return

Non VAT subbies are subject to CIS, is it correct to assume all transactions are out of scope of vat

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I have just started at a new construction firm and politely putting it, the accounts are all over the place.

The one area I need assistance with is CIS as I have not been involved with this scheme for over 10 years, therefore my knowledge is a tad rusty.

The company contracts sub contract work to both VAT and non VAT registered subcontractors. I understand the domestic reverse charge concerning the VAT registered subbies and how these should be processed for CIS/VAT however rather embarrassingly I am stumped with the non VAT subbies.

Currently the finance team are posting the non VAT subbies net sum of the invoices to Sage50 using vat code T1 and amending the tax to zero, they are then inputting a separate invoice for the CIS tax deduction and coding this to T9.

Aside from the fact this seems utterly backwards to me (I am now setting up the CIS module on Sage to ensure inputs are correct), all the invoices they input show on the VAT return in box 7.

I believe this is incorrect as these invoices are out of the scope of VAT therefore should be coded to T9, however I fully understand my assumption may be incorrect and if anyone can advise, I would appreciate it.

My question is, are all the invoices submitted by non VAT subbies and subject to CIS deductions classified as out of scope of VAT therefore these transactions should be coded to T9 so they do not appear on the returns?

Many thanks in advance.

Replies (9)

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By doubletrouble
28th Apr 2022 16:12

I believe that they should be included in the VAT return.

Thanks (2)
Replying to doubletrouble:
By Max Maxwell
28th Apr 2022 16:25

doubletrouble wrote:

I believe that they should be included in the VAT return.

I agree!

Thanks (1)
By Paul Crowley
28th Apr 2022 17:24

The box should contain all payments on which there would be VAT whether or not the seller is VAT registered

That makes 3

Thanks (2)
By Pennywise321
28th Apr 2022 19:41

Agreed with all of the above, they should be included.

Thanks (1)
By susieq
28th Apr 2022 20:02

I also believe should be included in the vat return, and not just the net amount. I'd enter the total invoice using a code that is included in the vat return, but with no vat, then a credit note to cis deducted (t9), unless on cash accounting of course, in which case you need to set up a cis bank account to get the total payment onto the vat return.

The payment isn't outside the scope, the supply would be vatable if the trader was registered for vat.

Thanks (1)
By D V Fields
28th Apr 2022 20:36

Many years' ago I understood from a VAT expert that invoices from non VAT registered persons should not be included in box 7. Since then I have been told (but with less authority) that they should be included.
The VAT Notice -
s3.2 clearly puts supplies by someone who is not a taxable person as being "Outside the scope" of UK VAT.

If there is a subsection that specifically brings it into the Return (CIS or otherwise) I am not aware of it. It would be great if one of the experts could clarify.

NOTE: Tolley guidance specifically says exclude from box 7:
* the value of sales of goods or services which are subject to the domestic reverse charge

Thanks (1)
By DKB-Sheffield
28th Apr 2022 20:44

I had a box 6 (not 7) issue in the past!

A client ended up being saddled with 3 compliance checks on the back of the differing views of various officers regarding OOS.

Client's main income is OOS (MOT Testing - no servicing). Guidance then (and I'm certain now) is 'no OOS sales in box 6'

Due to a change in trade client's box 6 income dropped significantly (overnight). However, boxes 6 and 1 tallied. No surpise a compliance check was triggered.

3 years and 3 compliance checks later (where each officer had a different take), client went from not including OOS sales in box 6, to including them, not including them, and then including them again! The final officer made some notes and corrected prior returns 'for consistency' and (touch wood) it's been 6 years since the last inspection!

All in, a complete; waste of my time; waste of my client's time; waste of HMRC's time, and; complete waste of resources! Total penalty/ fine = £NIL!

On the side of purchases however, HMRC's guidance does seem to give specifics of what not to include (MOT Certificates being there) but does not make any special reference to supplies from non-VAT reg suppliers. I therefore include supplies from non-VAT reg suppliers in box 7.

Notwithstanding the above... isn't it actually relatively insignificant. I was always of the understanding that penalties and other such action could not be taken over box 6 and 7 errors as there is unlikely to be any loss to the treasury? I may be wrong though!

Thanks (1)
By lionofludesch
30th Apr 2022 08:00

I believe that HMRC - or maybe HMC&E - quietly changed their minds. Originally, they definitely were to be excluded. Now, they are definitely to be included.

But I never fuss too much about box 7.

Thanks (1)
By PYE223
03rd May 2022 08:53

Hi Everyone,

Thank you for the advice. I have managed to speak to HMRC and amazingly they gave clear advice!

These costs are to be shown in Box 7 but they're not bothered about which vat code you apply to them as long as its zero, so T0 it is!

Thanks again.

Thanks (1)
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