CIS - Transaction Adjustments
If you need to make corrections to transactions entered under the CIS rules, it is important that these corrections are done with care to ensure that the transactions are accounted for in the correct manner.
Payments to CIS type suppliers must be made using the remittance advice procedure to ensure that any deductions withheld from the payments (for CIS tax or CITB Levy) are accounted for correctly and to produce the figures for the CIS300 Return.
Replacement cheque
If a CIS type supplier asks you to issue a replacement cheque, you can:
Issue a replacement payment manually.
Post an adjusting entry. If you choose this solution, your CIS300 Return will be overstated by the replacement payment and you will have to contact HMRC to notify them of this.
To post an adjusting entry
A subcontractor gives you an invoice for £1000.00.
You enter the invoice and when you make the remittance CIS tax and CITB Levy are deducted.
Net CIS Taxable | 1000.00 |
Net Material Cost | 0.00 |
VAT @ 17.5% | 175.00 |
Invoice Total | 1175.00 |
CITB Levy (@ 1.5%) | 15.00 |
CIS tax (@ 20%) | 197.00 |
Payment due | 963.00 |
You produce the remittance and print the cheque. The payment will be allocated automatically.
The subcontractor loses the cheque and asks you to issue a replacement.
To post an adjusting entry to cancel the first payment, you will need to enter a NEGATIVE debit adjustment.
Select Decrease Supplier Balance.
Select the supplier account code for the subcontractor and enter a reference and description for the transaction. The reference should help you to identify the original payment.
Select the Bank Analysis code for the bank account against which the remittance was raised and enter a negative value equal to the value of the remittance (in this example, a value of -963.00).
Tab from the entry line and enter another line.
Select the CIS Tax Analysis code and enter a negative value equal to the total of the CIS Tax withheld (in this example -197.00).
Tab from the entry line and enter another line.
Select the CITB Levy Analysis code and enter a negative value equal to the total of the CITB Levy withheld (in this example -15.00).
Click OK to save the adjustment. You will be prompted to post a NEGATIVE debit adjustment (in this example the value will be 1175.00). Click YES.
Select Correction.
Enter the supplier account code for the subcontractor and click Display.
Select the invoice (INV), the payment (PAY) for 963.00 and the debit adjustments (ADR) for 197.00 and 15.00 and click OK to save the correction allocations.
Select Allocate.
Enter the supplier account code for the subcontractor and click Display.
Select the payment (PAY) for 963.00 and the debit adjustments (ADR) for 197.00 and 15.00 and 1175.00. Click OK to save the allocations.
Select Remittances Cheques.
Select CIS - Subcontractors from the Pay menu, enter the supplier account code for the subcontractor and click Display.
Select the invoice and process a new remittance.
That completes the posting of the adjusting entry.
Warning - Caution should be exercised when making DR Adjustments (Decrease Supplier Balance) to Subcontractor accounts. You must ensure that any amount posted does not result in a NEGATIVE Materials total on CIS300 return for the next Tax Month period. HMRC will NOT accept negative values on monthly returns and the CIS300 return will fail validation.
CIS Tax and CIS300 Return
CIS Tax and your P32 Employer's Payment Record (Statutory Return in Access Payroll)
Care must be taken that you do not overstate the CIS Tax on your P32 Employer's Payment Record (Statutory Return in Access Payroll) if the original payment was made in a tax month different from the period in which the cheque is replaced.
If you post the adjusting entry to the same period as the original invoice, but post the replacement remittance to a later period, you will need to reduce the CIS Tax to be paid over to HMRC when completing the next P32 Employer's Payment Record (Statutory Return in Access Payroll).
CIS300 Return
If an adjusting entry is posted, the CIS300 Return will be overstated by the second remittance.
In this example: Gross will be 1970.00 (should be 985.00) and Tax Withheld will be 394.00 (should be 197.00)
You will need to contact HMRC and notify them of the position. They will then adjust the CIS300 return; you cannot make adjustments to the return.