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steve80
September 24, 2019
Solved

How do I ensure that a credit note to a CIS client actually includes the CIS element

  • September 24, 2019
  • 1 reply
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Original commenter did not share additional details
Best answer by GeorgiaC

Hi

Thank you for your reply, but I am still missing something!

CIS is enabled.

If I post an invoice for £1000 to the CIS labour standard (20%) code I end up with

net £1000

VAT £200

gross £1200

less CIS £200

balance due £1000

If I then post a credit note to the same code, I end up with 

net £1000

VAT £200

Gross £1200

amount to credit £1200

This leaves me with £200 over the debtor balance, as that is showing as £1000 due to the CIS. I can't make the credit note £1000, as that will throw out the labour and VAT.

How do I post a credit note that will contra the correct amount of labour and VAT but match the debtor balance? The credit note does not account for CIS, even though I have used the same CIS labour code.


Hi AB74, 

 

Thanks for getting back to us. 

 

As the contractor would've withheld the CIS suffered amount to pay, the gross total of the invoice is the amount which you would need to credit, i.e. in the above scenario £1000.

 

I'd recommend following our guide here to write off the invoice as bad debt - as this process applies a credit note to close the transaction, you'll want to remove the CIS element from the invoice because as soon as you write it off it'll class it as paid and post to the CIS accounts. You can then edit the description field on the invoice after editing to note that this was originally CIS. 🙂

 

 

 

 

 

1 reply

G
GeorgiaC
September 24, 2019

Hi steve80,

 

You should not use CIS on a credit note as CIS is calculated on a cash basis and is not claimed by HMRC until the invoice is marked as paid. 

 

Is the credit note you wish to raise in relation to an invoice you have already raised to a contractor?

M
markmann
September 24, 2019

clarification required please

 

say invoice raised for £1000 labour only

 

contractor customer settles the invoice 

 

£800 paid to you as sub- contractor , and £200 to HMRC.

 

later your customer wants 100% of the invoice  value back.... poor workmanship.

 

You as Sub contractor raise credit note , £1000 to recognise refund .

 

Assume that as subcontractor you will not be doing future work for this customer.

 

The Contractor  will l want the credit note settled , by you

 

£1000 then paid to Contractor

 

the CIS scheme  does not allow for a credit of 20% tax.

 

effectively you the supplier of labour will have NIL £sales

 

but £200  sitting in the HMRC CIS account, to be offset against eventual tax liability

 

your cash flow is         £800 in     £200 in..... sitting with HMRC    and £1000 out 

 

you will have the pain of £200 now , relieved when £200 less tax paid   later 

 

unless customer will give you extended time to pay him £1000 !!!

 

freedie

 

 

 

 

 

 

S
steve80Author
September 24, 2019

Thanks

 

That £200 tax paid was what I was trying to avoid except it was a good deal more. Looks like I'll have to swallow the tax until HMRC deign to give us our rebate.

 

Regards

Steve

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