VAT cash accounting and CIS on Xero

How to get VAT on the VAT return

Didn't find your answer?

Scenario: Supplier invoice entered to Xero with 20% VAT. Most paid off via bank. Part withheld for CIS. I entered a credit note - no vat - for the CIS. I am not using the Xero CIS option.
I noticed, as I suspected would be the case, that the VAT paid off by the credit note has not been included in the VAT return. I requested help from Xero support and got a long winded reply, advising all sorts of irrelevant advice including asking my adviser or HMRC what to do. The only useful part of this reply suggested that I will have to use the adjustment feature on the VAT return option should the client be using MTD. Fortunately he is an MTD client.

With the domestic reverse charge option I suspect this sort of issue will no longer prevail in future.

Instead of a credit note, I could use cash to pay off the CIS part of the invoice. And then do a cash receipt for the same amount to PAYE. That's my preferred option, but this wasn't shown on the Xero reply.

How have you handled this?

Replies (4)

Please login or register to join the discussion.

RLI
By lionofludesch
27th Aug 2019 09:41

Well, there's your problem. The credit note.

The CIS isn't a credit note, although sometimes it's convenient to treat it as one as a work around.

It's actually the payment of a sales invoice. It's just paid to HMRC instead of the client.

Why not set up an HMRC bank account ? Payments into it are the deductions. Payments out settle assorted taxes or go to the business current account.

Thanks (1)
avatar
By Cloudcounter
27th Aug 2019 10:28

No need to set up an HMRC bank account. Change the properties on the existing PAYE control account to "Enable payments to this account"

Then you record a payment off the invoice to that account dated the same as the customer's payment/CIS deduction certificate. It clears the invoice and puts the amount as a debit to the PAYE control

Thanks (1)
Replying to Cloudcounter:
RLI
By lionofludesch
27th Aug 2019 11:24

Several ways to work round it.

Credit notes aren't one of them imho.

Thanks (0)
Replying to Cloudcounter:
By Moonbeam
27th Aug 2019 11:33

Thank you Cloudcounter - this was exactly the stuff I needed to know and will save me an extra entry.
I didn't before understand what "enable payments to this account" meant. Pity Xero couldn't help me themselves, but what do they know..

Thanks (0)