CIS - Remittances
Remittances for invoices posted to CIS type suppliers must be processed using the remittance advice procedure. This ensures that any CIS tax is accounted for in the correct manner.
For Suppliers for whom you hold bank details, you will be able to create a BACS run of remittances.
For others, you can create cheque payments.
You will not be able to produce a mixed run of remittances for CIS type suppliers and non CIS suppliers.
Contents |
Processing Remittances
|
Statement of Payment and Deduction |
Negative Remittances |
Advance Payments |
Part Payments |
Processing remittances
About the remittance process
When remittances are processed, the system:
Prints a remittance advice note for transactions you have selected.
Generates and posts a payment transaction in the Purchase and Nominal Ledgers.
Allocates together the selected transactions and the generated payments.
If you selected Remittances Cheques and entered the next cheque number on the search window, the cheque numbers will be written to the transactions for reference.
If you selected Remittances Cheques and ticked the Cheque option on the Remittances list window, the remittance information will be saved in a batch ready to produce a cheque run.
If you selected Remittances BACS, the remittance information will be saved in a batch ready to produce a BACS export file for you to forward to your bank.
Before processing:
On the search window, ensure that the posting details are correct. The analysis codes displayed will be those you have selected as your defaults in the System Control settings and on the CIS Subcontractors - System Options window.
If you are paying the remittances by hand written cheque, or you are using remittance stationery that includes a cheque, you can enter the next cheque number you will be issuing. This is entered on the Search window. Do not tick the cheque option on the Remittances list window. The cheque number will be written into the transaction header reference field and to the detail field on the transaction detail when the payment is posted.
If you will be printing cheques, you should tick the Cheque option on the Remittances list window. This will place the remittance information in a batch ready to produce the cheque run. If you leave the Cheque No. field on the search window empty you will be prompted to enter the first cheque number of the next batch of cheques when you print the cheques. The cheque number will be written into the transaction header reference field and to the detail field on the transaction detail when the cheque is printed.
You might find it useful to view a summary of the payments that will be processed. Open the Remittances summary window from the drill button above the Supplier column.
Processing
Open the remittance option: Remittances.
Select the remittance method - Remittances Cheques or Remittances BACS.
On the search window, select CIS -Subcontractors from the Pay: menu at the top of the window.
Enter search criteria to limit the transactions that are retrieved.
Click Display to build the list of transactions for payment.
Select the invoices that are to be paid. This can be done by entering the Allocated Value for each line or with a double click on the transaction to enter the full value of the transaction in the allocated value field or by using the switch buttons to populate the allocated value field.
When you are happy that the remittance values are correct, click OK to process the payments.
Pay Nominee
The Remittances summary window also contains the option Pay Nominee. This enables you to make the remittance to a person or organisation other than the Subcontractor whilst still remaining within the CIS rules.
You should select the tax status of the Nominee.
Tax will be withheld at the higher of the two rates if the tax status of the Subcontractor and the Nominee are different.
Statement of Payment and Deduction
For most remittance stationery, a Statement of Payment and Deduction section will be included as part of the remittance.
This will included :
Your UTR (as the contractor).
The name and UTR of the subcontractor.
A statement of payment and deduction. The amount deducted shown here is the CIS Tax.
The total value of deductions. This will include both CIS Tax and CITB Levy if this has been withheld.
This information can be reprinted from the Statement of Payments option. The statement of payment and deduction will not be printed on the remittance when there is insufficient space.
There is insufficient space on Remittance with APACS 3 Standard and Remittance with APACS 3.1 Euro Cheque stationery.
There may be insufficient space on other remittance stationery if you have reduced the lines per page when setting up the remittance stationery.
In this case, you should print the a Statement of Payments from the Statement of Payments option immediately, selecting the Supplier code in the Simple Search window.
The statement will not contain the text DUPLICATE the first time it is printed and can be passed to the subcontractor with their remittance advice.
Remittance stationery is selected from the Documents tab in System Options. Click on the Stationery Options button to open the selection window. See Stationery Options.
Negative Remittances
If you have entered an invoice against a Subcontractor and paid this Subcontractor only to find out you have mistakenly selected the wrong Subcontractor, you can enter a Credit Note and a Negative Remittance to correct the situation.
The ability to enter negative remittances ensures that the figures that you return to HMRC are correct.
Correcting mistakes in CIS transactions can be a tricky business as you must do it in a way that will ensure that the HMRC CIS300 return is updated correctly.
You can enter a Credit Note to clear an Invoice that has been posted to the wrong account.
Transactions only appear on the CIS300 Return when payments are made.
To correct a Remittance that has been posted to the wrong account you must enter an Negative Remittance.
The Negative Remittance will ensure that the figures entered on the CIS300 Return are correct.
If the CIS300 Return has not yet been updated for the period that contains the transactions, then the figures for the return will be corrected.
If the CIS300 Return has been updated for the period that contains the transactions, the negative entry will not be reported on the next CIS300 return and you must contact HMRC regarding the correction.
Negative values will appear as a second page in the report so that you can identify them for HMRC.
Warning: If you are printing remittances with cheques, a negative value cheque will be printed. You must ensure that this is destroyed. Similarly, if you are paying by BACS, you must delete the BACS payment from the list of those to be generated.
Note: You must reverse the entire transaction; it is not possible to part correct a payment for a subcontractor.
Advance Payments
Recording Subcontractor invoices and remittances is easy when everything occurs in a logical order. You receive an invoice and enter it against the Subcontractor Supplier account. Subsequently, you process a remittance and send a payment to the Subcontractor by cheque or BACS. Access Accounts produces a Statement of Payment and Deduction and returns the required information about the payment to HMRC. However, should you need to make an advance payment to a Subcontractor, you must be careful to ensure this transaction is processed correctly.
Advance payments should be recorded on the Subcontractor's Supplier record by entering:
a Decrease Supplier Balance adjustment (a Debit adjustment)
using a Bank Analysis type Purchase Ledger Analysis Code.
Example:
You make a payment in advance of GBP500.00 to a standard Subcontractor.
Do this by entering a Decrease Supplier Balance adjustment using a Bank Analysis type Purchase Ledger Analysis Code.
An invoice from the Subcontractor is received and entered. The invoice is for a Net Value of GBP1000.00
Generate a remittance for the invoice and the debit adjustment together.
Tax will be withheld according to the CIS rules.
For this Subcontractor, 20% tax will be withheld. This is the Standard Rate entered in our System Control settings and is just an example. You should always check that you are applying the correct current tax rate.
The remittance total will be GBP300.00 (1000.00 less 500.00 paid in advance less 200.00 tax withheld).
The following values appear on the statement of payments:
Gross 1000.00
Materials 0.00
Amount Payable 800.00
On the CIS300 Return the transaction will be included as:
Gross 1000.00
Materials 0.00
Tax withheld 200.00
This processing can be undertaken because transaction lines posted using a Bank or Discount type Purchase Ledger Analysis code do not interfere with the Statement of Payments and CIS300 return.
Transaction lines posted using a Bank or Discount type Purchase Ledger Analysis code will not be included in the Materials figure.
Transaction lines posted using Bank or Discount type Purchase Ledger Analysis code will not be included in the Gross figure.
Part Payments
Remittances for invoices posted to CIS type suppliers must be processed using the remittance advice procedure. This ensures that any CIS tax is accounted for in the correct manner.
For Suppliers operating under CIS with a tax status of Standard or Higher, the tax can only be withheld from the payments you make to the supplier. This means that if an invoice is not paid in full, the tax withheld will be in proportion to the amount paid.
Example
The invoice and anticipated payment if paid in full:
Invoice | Payment | ||
Labour (CIS taxable) | 1000.00 | Invoice total | 1273.25 |
Materials | 100.00 | less Settlement discount - 10% (of 1100) | 110.00 |
1100.00 | less CITB Levy @ 5% (of 1000) | 50.00 | |
Possible settlement discount of 10% = 110.00 | less CIS tax @ 20% (of 850 - this calculation is detailed below) | 170.00 | |
VAT @ 17.5% (on 990) | 173.25 | Amount Payable | 943.25 |
Invoice total | 1273.25 |
CIS tax is calculated on: Labour less the settlement discount that relates to the labour less CITB Levy.
The settlement discount is spread proportionally between the Labour and Material costs, so 100.00 relates to the labour.
The calculation will be: 1000 - 100 - 50 = 850.
When a part payment is made:
You agree to make a payment of account of GBP1000.00.
You notify the Subcontractor that you intend to take GBP100.00 of your permitted settlement discount immediately because you are making an early payment.
This is accounted for as follows:
The payment is 78.54% of the invoice total (1000 divided by 1273.25)
It is deemed that you will be paying 78.54% of 1100.00 = 863.94
The labour part of this total is 785.41 and the materials is 78.53. The proportion of labour to materials from the original invoice is used to determine this split.
The CITB Levy is raised on the labour only: 5% of 785.41 = 39.27
The settlement discount is spread proportionally between the Labour and Material costs, so the discounted labour = 694.51.
The CIS tax is calculated on the discounted labour less the CITB Levy: 20% of (694.51 - 39.27) = 131.04
In summary:
Labour
|
785.41
|
CITB Levy withheld
|
39.27
|
Materials
|
78.53
|
CIS tax withheld
|
131.04
|
863.94
| |||
Agreed payment on account
|
1000.00
| ||
Less CITB Levy withheld
|
39.27
|
| |
Less Settlement discount
|
100.00
|
| |
Less CIS tax withheld
|
131.04
|
| |
Actual Remittance
|
729.69
|
|