Seeking your wonderful advise and help again!!! xx
Have decided to take the step to learn CIS. I was hoping to find a course i could do but cant seem to find one - not even a webinare or anything
So i have asked an accountant i know to set m some sample test questions to work on
I understand the principles of how to raise a CIS invoice eg
Labour 300
Material 75
Total 375
Vat on that 75
New Total 450
20 % CIS on labour only 50
Customer pays 400
However i have been set a test example that im struggling with and need sone guidance in the right direction
EG the Subcontractor is a ltd company and the contractor issues him a weekly payment slip
Gross Taxable 1669.84
Tax 333.96
VAT 25.55
Total paid to him 1361.43
and to be honest im totally confused as i cant make that work with the above example at all :(
and would at least like to have a small grasp of what the hell its all about before asking the accountant - as id like the accountant to issue me more examples so i can learn given there seems to be no actual CIS course to do and given hes been kind enough to set some tests i dont want to take up the time he is giving FOC on just one example - id at least like to have some understanding first so he will be willing to give me some more examples
Could someone point me in the right direction pretty pretty please ? im wondering if there is a trick in the question im not seeing??
By the way more than happy to post all examples if they help others!!!
You should revisit this, the CIS deduction isn't £50
However i have been set a test example that im struggling with and need sone guidance in the right direction
EG the Subcontractor is a ltd company and the contractor issues him a weekly payment slip
Gross Taxable 1669.84
Tax 333.96
VAT 25.55
Total paid to him 1361.43
and to be honest im totally confused as i cant make that work with the above example at all :(
and would at least like to have a small grasp of what the hell its all about before asking the accountant - as id like the accountant to issue me more examples so i can learn given there seems to be no actual CIS course to do and given hes been kind enough to set some tests i dont want to take up the time he is giving FOC on just one example - id at least like to have some understanding first so he will be willing to give me some more examples
Could someone point me in the right direction pretty pretty please ? im wondering if there is a trick in the question im not seeing??
Hi Gail
On the first example, the CIS tax isn't £50
On the second example, the VAT is woefully wrong. It should be the same as the CIS Tax
Is it that the £1669.84 includes VAT? I can't get it exact but if that's the case, calculate the VAT as 1/6th of the total, in this case £278.31
So the calculation should be
Labour £1391.53
+ VAT £278.31
Total £1669.84
- CIS deduction £278.31
Subby gets £1391.53
Just to advise that the 20% CIS is only if the subby has been verified. If not the deduction would be 30%
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Looks like you are using the vat fractoin in the first £50 instead of £60, so its about knowing what percentages/fraction type calculations to do.
Can I suggest you post the actual question as a screen shot as I often see that there is something missing when its just typed out. You can redact any private info.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Agree that this is where the problem with the VAT amount shown in the question set by the accountant lies as in the different rates, but should it not have shown what VAT rates were being applied to each amount on the Invoice?
Be nice to see what Joanne asked for, the actual layout of the question
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
I'm puzzled as to why only two of the amounts are subject to VAT? Is there anything in the Accountant's question to clarify it?
Zero rated work and standard rated no doubt.
New build house exempt
Garden wall standard rated.
Edited to change zero rated to exempt
-- Edited by AlbaBeanCounter on Friday 18th of August 2017 07:59:13 PM
Ahhhh Tomo - which is it? Zero or exempt?
Agree that there can be a mix of VAT rates, even 5%.
I was right first time... New builds are zero rated. Sure materials for structure would be exempt... Will have to have a wee refresher.... VAT so exciting
Hi all,
Thank you so much for the input - the accountant simply gave me a payslip format to work it out from.
I suspect the account has put dummy name in etc but as it's not the typical Joe Bloggs people tend to use I will blank that out first .....never attached anything on this site before so bear with while I figure it out!!! Xx
find the file that you want to attach and click open
once its been attached you can insert it into the body of the message simply by hitting Insert next to the image
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I was right first time... New builds are zero rated. Sure materials for structure would be exempt... Will have to have a wee refresher.... VAT so exciting
Follow the money! OK I was thinking of the recent TV program of that name, but follow the build (generally).
Sounds like you may consider specilising if you love VAT so much.
Have you waded through the actual act yet? Now that would send most folk to sleep when they have insomnia!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
find the file that you want to attach and click open
once its been attached you can insert it into the body of the message simply by hitting Insert next to the image
HTH,
Shaun.
Hi Gail
Are you accessing the site from a PC?
Just to add to Shaun's note, advanced editor is one of the options at the bottom of the 'quick answer' reply option. You cannot get to it when doing a 'quote' type response as far as Im aware and you probably will not see the option if you are on a mobile phone.
Use 'Paint' software to redact any info, save as a picture and job sorted ready for upload.
-- Edited by Cheshire on Monday 21st of August 2017 06:20:27 AM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I was right first time... New builds are zero rated. Sure materials for structure would be exempt... Will have to have a wee refresher.... VAT so exciting
Follow the money! OK I was thinking of the recent TV program of that name, but follow the build (generally).
Sounds like you may consider specilising if you love VAT so much.
Have you waded through the actual act yet? Now that would send most folk to sleep when they have insomnia!
I haven't looked at the actual act, as to specialising... One area I do expect to specialise would be construction companies. I grew up surrounded by brickies and labourers and my father was a contractor (brick and block work). I used to help him with is VAT, Tax and CIS. (He was a great educator) That's what drove me to further educate myself.
You are confusing me and I work for a construction company and deal with CIS every day.
Are you sure the accountant knows what he is doing? (Some accountants are rubbish with CIS)
Is the gross taxable figure the amount the subcontractor was actually paid and so you are working backwards? Is that amount including VAT? IS their CIS status a standard 20%? IS the entire figure labour only or are there any materials? Why are you working backwards?
Firstly whoever made out that payslip needs to learn the rules of rounding (1669.84 times 20% CIS deduction equals £333.968 which should be rounded up to £333.97
And that VAT figure surely must be wrong.
You don't deduct VAT from someone you pay, you add it on and they pay it over to HMRC.
If I received a bill for labour from a subbie I'd itemise it like this:
Total labour figure £1,669.84
Plus 20% VAT £333.97
Minus 20% CIS deduction £333.97
Total payable to subbie £1,335.87
Totally agree with what Julie says about a subbie payment
Why is the VAT figure £25.55 it can only be from the figures of £42.97 and £84.80 plus 20% VAT but if this is the case why has it been deducted and not added on and why only charged on these figures and not the rest.
Might be good to look at the Invoice as I always thought that Carpet fitting is excluded from CIS
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Might be good to look at the Invoice as I always thought that Carpet fitting is excluded from CIS
I stand corrected on this, I just looked into it in more detail and it seems that although carpet fitting is excluded from CIS because it appears on the same Invoice and I would assume part of the same job it does in fact become liable to a deduction under CIS
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
But you are doing it backwards. Its the subbies job to raise the invoice, not the contractors. The subbie charges the VAT and the contractor deducts the CIS. Why is the accountant giving you this test when its irrelevant.
the subbie should send an invoice reading something like this
The contractor should then verify the contractor and deduct 20% on the net figure. The statement of deductions should read something like this:
Total gross amount (less VAT) £1,669.84
Less Materials £0.00
Amount liable for deductions £1,669.84
Total tax deducted £333.97
The contractor then pays the subcontractor £1,669.84 which is broken down as detailed in my post above.
This is of course assuming all items are Vatable and subject to CIS but the onus would be on the subbie to itemise VAT rates and non deductible items (for example of an invoice was for commissioning only, no installation)
Are any of those items listed materials? Eg I've read plot vinyl as the subbie plotting where to put the vinyl on a plan or something but if the vinyl and carpet are materials he provided that changes all the figures.
I don't see how you can raise an Invoice if the only information you have is contained on the payslip you posted.
You need the information on the Invoice to get the payslip otherwise it will be just guesswork maybe the accountant should have provided you with the Invoice and asked you to do the payslip with the CIS deductions
Hi Julie
Agree with what you say about the materials changing all the figures but as I said above its impossible to say without the actual Invoice or further information but it seems that 20% CIS deduction has been charged on the total figure
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
What the accountant has asked me to do is create the posting entries needed for the subbie ltd company accounts and vat return
Am feeling really deflated as so wanted to learn
Hi Gail
I wouldn't feel deflated as it is not just you there has been a number of us who have looked at the payslip and no one has been able to come up with an answer as to how the figures you posted work out, maybe someone will come on later today and be able to give you an answer but if not I don't think there is any shame in going back to the accountant and asking how these figures came about as that's all part of the learning being able to actually ask someone when you don't know the answer and listening to the explanation given.
Sorry for not being able to offer more help.
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
I wouldn't feel deflated as it is not just you there has been a number of us who have looked at the payslip and no one has been able to come up with an answer as to how the figures you posted work out,
I gave Gail the correct answer upthread. The mistake she had made was to deduct the VAT from the invoice rather than adding it.
Edit: Got my names mixed up, sorry
-- Edited by Leger on Tuesday 22nd of August 2017 12:10:27 AM
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
What the accountant has asked me to do is create the posting entries needed for the subbie ltd company accounts and vat return
Am feeling really deflated as so wanted to learn
To be fair, I think we all got confused because that's not what you asked in your original post.
So lets do the task.
First raise a purchase ledger entry for Mr Subby.
£1669.84 + 25.55 VAT coded to Cost of sales - Subcontractors (VAT box may show £333.97 but you should be able to overwrite that)
then do a purchase ledger credit for £333.96 coded to Creditors - CIS Tax or HMRC CIS.
Then pay Mr Subby 1361.43 You can see from the attached screenshot what the purchase ledger account looks like and on the left hand side you can see where the entries have gone to in the accounts (second screenshot is so you can see the subcontractor entry)
When the CIS is paid over to HMRC you would record £333.96 in the bank account coded to the creditors CIS and this will make that entry zero.
Please ask me to clarify further if theres anything you dont understand.
Edited to add screenshots
-- Edited by Leger on Tuesday 22nd of August 2017 12:31:54 AM
Thanks so much everyone xx
Plan is to sit down this afternoon with a large cup of coffee and that attitude "I can learn this" make sure I understand what has been posted on here and do another of the tests accountants gave me and post and hopeful I will post the right answers!!! Here's hoping!!!
Then if I get that right reward myself with wine instead of coffee!!
I spoke to the accountant today and he said reason he gave me the payslip example is he felt I was trying to learn it too text book like and life is never as some as here's the labour here's the materials etc ...he said very often the subbie will just pass over the payslip from the contractor and left to bookkeeper/accountant to record in accounts correctly
I spoke to the accountant today and he said reason he gave me the payslip example is he felt I was trying to learn it too text book like and life is never as some as here's the labour here's the materials etc ...he said very often the subbie will just pass over the payslip from the contractor and left to bookkeeper/accountant to record in accounts correctly
Thats all well and good but any GOOD trainer, whether a formally qualified one or just acting in a mentor capacity, knows the best way to explain things to a student is to work through straight forward structured examples,adding complexity as they go and work you up to fully complex transacations. On the basis you got the first one wrong I think he may well be doing you a diservice and not aiding your correct training by doing things in such a way at this juncture.
I do think he is right in giving you real world stuff, of course. BUT I disagree with the approach in terms of training but also on the basis of the notion of recording such 'correctly' when you are only getting a one sided version and that version is not from YOUR client, ie the one who you should be protecting from himself, HMRC and dodgy contractors, rather than accepting the word of the contractor that this payslip is correct.
Someone should be challenging the idiot contractors and sub contractors who present such paperwork - ie that is the bookkeeper/Accountants role.
Now if the said Accountant has done this then fair enough, but you indicated that the second example was a real case so we can only surmise that this has not been challenged. You cannot just accept that the VAT is correct and should find out why this has so little VAT included. He should have the answers and it may well be correct, but as part of your learning he should now be able to supply the actual information in full so you understand it fully, clearly worringly he has yet to do that, unless of course at this stage, he is still waiting for your answer and/or any challenging questions.
He should, as above, also be encouraging his client to raise a proper invoice in the first place - self billing from contractors is not the correct way to go and is not acceptable in this area. Besides we all know that such payslips can actually represent more than one invoice and may be (and very often are) wrong. Contractors will always challenge subbies bills and often their payments bear no resemblance to the actual debt due. So the lack of information from a subbie to a contractor is of concern and corrective action MUST be encouraged - how else can you justify ANY of it in the event of an HMRC inspection - not just for CIS purposes but VAT and S/A tax or CT.
To be clar - Im not saying all contractors are bad. Ive seen some dreadful paperwork and attempts by subbies to extract more cash than is due. But that is the whole point of having the 'story' from both sides, which will be discovered and corrected as you process the transactions. The there or thereabouts method of Accountancy doesnt work at the best of times, but especially so in the CIS arena!
Just to add to John's fab explanation of processing the entries - I would list each of the VAT rated items separetely in the software (one PI, several entries) once, of course, the correct VAT status and amounts have been ascertained. Easier when looking back if HMRC do visit!
Of course part of the confusion with the 'incorrect' deductions earlier may well have been a typo - we dont know without the actual question/'evidence' supplied by the accountant being included as a picture or pdf - so I would encourage such such in the future that might help folk formulating their answers.
Also perhaps look at some examples yourself via the HMRC CIS pdf helpfile - there are at least half a dozen or so with different situations to work through.
-- Edited by Cheshire on Tuesday 22nd of August 2017 02:19:11 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I'd been trying to think how to compose a reply but Joanne has put it so much more eloquently than I could. The accountant is doing you a dis-service , straight forward examples followed by more complicated ones definitely.
I'm from the other side. I work for a ltd company main contractor. Quite frankly if one of our many subbies presented me with that level of information they would not get paid - end of. We have on occasion assisted a small sub-contractor to produce his own invoices (by giving them a template and assisting them as to what figures to put in). Also from the other side, a contractor is legally obliged to produce a Statement of Deductions to a sub-contractor each month to assist with their accounts.
So called Payslips give the impression of employment, not self-employment. The accountant is giving you the impression that this type of paperwork is normal and acceptable, it isn't and as Joanne said, it won't stand up to an HMRC inspection. When we were last inspected HMRC wanted to know how we knew that what the subbies were invoicing was correct and they were very suspicious of any labour only subbies (luckily we have very, very few of these and those that are were very short term or highly specialist areas).
My company also sub-contract to much larger contractors and I can't tell you the number of times that their Payment Certificates to us (we do have formal self-billing arrangements with some, they have to be administered in a particular way and renewed annually) have been incorrect for one reason or another.
Julie - the accountant said that in this case the contrator gives the subbie this payslip and pays him the amount
Joanne - there is no snap shot to send as the account sent it in email body and i have copied and pasted as i received it (without the dummy name etc) and yes he is still waiting me to answer
John - i am am confused as the subbie has already been paid .... and wouldnt it be sales invoice and credit note?
-- Edited by Gail72 on Tuesday 22nd of August 2017 02:24:51 PM
Hi Gail I think the problem is, in part, that we seem to be getting the info piecemeal. (extra info at 21/8 14.29 to 18/8 @15.33, but presumable on the back of the piecemeal way it is being fed to you). In addition when you mentioned the payslip in the 21/8 version it was assumed that you had seen the payslip. That information contains errors (total deductions being the one that has caused most of the confusion, along with the VAT rate, which we think we know what it attaches to, but need clarification.
So - is my understanding that you are looking at the CIS from a subbies point of view and he is supplying services to the contractor? I dont think this was said at the outset, unless Ive missed it in my usual habit of scan reading. John usually works with contractors so hence his take on it. So if its the former you would be correct - it would need a sales invoice.
But remember you need to get that 'sales invoice' from your client. Before that I think you should go back and ask about the VAT situation.
-- Edited by Cheshire on Tuesday 22nd of August 2017 02:43:07 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Well Gail, I wouldn't like to be that contractor in the case of an HMRC inspection. And none of this helps you to learn the correct procedure so that you, in the future can advise your clients on the proper way of doing things.
I have just checked with the accountant and this example is all labour
Therefore i would have expected it to be
Labour 1669.84
Materials 0.00
Total Before Vat 1669.84
VAT @ 20% 333.97
Total before CIS 2003.81
CIS @ 20% Labour 333.97
Total payable by contractor 1669.84
I know because i havent got back to the 1361.43 that the subbie has been paid ive gone wrong All i know is the 308.41 difference is the 333.96 tax @20% on payslip less the 25.55 vat on payslip
I'd been trying to think how to compose a reply but Joanne has put it so much more eloquently than I could. The accountant is doing you a dis-service , straight forward examples followed by more complicated ones definitely.
I'm from the other side. I work for a ltd company main contractor. Quite frankly if one of our many subbies presented me with that level of information they would not get paid - end of. We have on occasion assisted a small sub-contractor to produce his own invoices (by giving them a template and assisting them as to what figures to put in). Also from the other side, a contractor is legally obliged to produce a Statement of Deductions to a sub-contractor each month to assist with their accounts.
So called Payslips give the impression of employment, not self-employment. The accountant is giving you the impression that this type of paperwork is normal and acceptable, it isn't and as Joanne said, it won't stand up to an HMRC inspection. When we were last inspected HMRC wanted to know how we knew that what the subbies were invoicing was correct and they were very suspicious of any labour only subbies (luckily we have very, very few of these and those that are were very short term or highly specialist areas).
My company also sub-contract to much larger contractors and I can't tell you the number of times that their Payment Certificates to us (we do have formal self-billing arrangements with some, they have to be administered in a particular way and renewed annually) have been incorrect for one reason or another.
So don't feel downhearted. (And have that wine)
Hi Julie
Sorry, hope I wasnt coming across as implying all contractors are 'dodgy' as Ive worked with some corking ones and its pretty obvious that you know what you are doing. I have, as I indicated seen some dodgy subby stuff going on....like purchasing tools and billing contractors, just as one eg. Ive also worked with formal self billing - as you say, special rules to follow and such who do it are (usually) pretty hot on their admin and such. Totally agree on the IR35 issue - lack of 'encouraging' subbies to bill properly means storing this problem one up for later, especially where s/e!
Think we should all just a few bottles of wine!
Keep going Gail - will get there in the end, although Im thinking perhaps you might be better getting some test examples from the guys on here, if they are willing.
-- Edited by Cheshire on Tuesday 22nd of August 2017 03:01:17 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I wouldn't feel deflated as it is not just you there has been a number of us who have looked at the payslip and no one has been able to come up with an answer as to how the figures you posted work out,
I gave Gail the correct answer upthread. The mistake she had made was to deduct the VAT from the invoice rather than adding it.
Hi John
Sorry I have done you a disservice there but what I wrote does not quite read as it sounded in my head, yes you did give Gail the correct answer but I was talking more about how the VAT figure came about after Gail said part of her test was to raise the Invoice.
Hi Gail
The Bookkeeper would also have the Invoice, which would be needed for the VAT return
-- Edited by Artois on Tuesday 22nd of August 2017 02:53:23 PM
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
EG the Subcontractor is a ltd company and the contractor issues him a weekly payment slip
Apologies - I must read things fully and slowly! I did in fact assume sales invoice in my response at first then clocked on to John's PI in his piccies! (Blame John.......lol, no I dont, easily done!!)
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Gail, your figures are exactly the figures I come to. You cannot possibly be expected to get to the so called "correct" figure without knowing why the amount of VAT is not the standard 20%.
In a real life situation you would say to your client, the VAT seems wrong, you need to check why. If I wasn't told otherwise I would assume someone (main contractor perhaps) has made an error in the calculation.
Sorry Julie i wasnt ignoring your answer - when i got the info from accountant it was all labour i came away from here so didnt refer and worked it out how i understood it - and came up with same as you!!!!!!!!!!!!
I have just checked with the accountant and this example is all labour
Therefore i would have expected it to be
Labour 1669.84
Materials 0.00
Total Before Vat 1669.84
VAT @ 20% 333.97
Total before CIS 2003.81
CIS @ 20% Labour 333.97
Total payable by contractor 1669.84
I know because i havent got back to the 1361.43 that the subbie has been paid ive gone wrong All i know is the 308.41 difference is the 333.96 tax @20% on payslip less the 25.55 vat on payslip
I could cry
Can we all just stop a minute? Am I going bonkers - no VAT because its all labour!!
Doug, John, Julie - please correct me or confirm - there should be VAT on labour if the subbie is VAT registered, UNLESS there its relating to certain types of build?
Gail - do you know what was being 'built' in this scenario?
-- Edited by Cheshire on Tuesday 22nd of August 2017 03:05:54 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position