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New CIS: Bookkeeping problems identified on Good Friday

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2nd Mar 2007
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Payments to sub-contractors which are subject to deduction are treated as made under the new CIS scheme if paid on the 6th April or later, even if the payment relates to an earlier period. As a result the payment will be subject to the 20 % deduction, rather than 18%.

You cannot enter a 18% deduction on the new return, and the statutory position is that the payment is effective on the date it is made.

As 6th April is Good Friday, HMRC is concerned that some contractors will treat a payment on Thursday 5th April as being made on 6th April for their weekly accounting purposes, and as a result could try and put it on their first new CIS return.

If the contractor actually deducts 20% from a payment made on the 5th it is incorrect even if accounted for on the 6th, payments made on the 5th are still subject to the old rules. As a subconctractor will only be entitled to a credit of 18%, he would be entitled to ask for 2% back.

It is advisable to warn bookkeepers and scheme administrators about this as they may overlook the significance of the date.

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By jimeth
05th Mar 2007 17:53

HMRC have already issued guidance on this
Surely, this is not a new issue.

HMRC have already advised contractors that they must not deduct the extra 2% for payments made before 6th April (even if the normal due date would be on or after 6th April). They have also advised that, where it is impractical for contractors to recalculate deductions on transactions already posted in their systems but unpaid, it will be acceptable to pay at the 18% deduction rate provided that payment is made in the first month of the new scheme.

Thus it will be acceptable, for the first month only, to include deductions at the 18% rate on the CIS300 monthly return. But this should only happen where the transaction was processed prior to 6th April but actually paid on or after 6th April.

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By steve tees
09th Mar 2007 10:46

Worth Repeating
Yes, I agree it is not a new issue but one worth repeating even ignoring the change on 06 April 2007.
I regularly find myself reminding construction businesses that the CIS date is the date the payment is made, not the date of the invoice, certificate, posting to the ledger, etc. Often businesses get confused with the self-billing/autenticated receipt dates, which again have nothing to do with CIS.

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