CIS: Notes for Contractors
If your subcontractor is covered by the construction industry scheme, you should record a purchase invoice which includes a deduction for tax and NICs. To create this invoice, click menu File > New > Invoice, then change the Document Type to 'Purchase Invoice'.Enter the usual details for a purchase invoice (allocate to the 'Subcontractor Costs' account). Then enter another invoice line for the CIS deduction:
There are several points to note about the CIS deduction line:
- The Description should start with 'CIS Deduction' and include the rate as a percentage.
- The deduction should be entered as a negative amount
- If you are registered for VAT, the VAT Rate should be '0%'
- The account should be 'Income Tax and NI Liability'. This will increase the amount you owe to HM Revenue and Customs.
You will need to forward the money you have deducted to HMRC, usually once per month. To find out the total CIS amounts deducted from supplier payments, click menu Window > Reports, then select the 'CIS Deducted From Suppliers' report.
Note that this report is based on payments made to suppliers - if a purchase invoice is unpaid it will not affect this report.
