While we wait for a new tax to be added to the system so recording a CIS deduction is easier, below is an example of a workaround:
Example:
- Invoice amount: £3,400 (no VAT)
- CIS Tax Deduction: £680
- Actual net amount in the bank: £2,720
To reconcile this example:
- Locate the transaction from your Bank Transactions page
- Categorise the first part of the transaction
- Apply the appropriate VAT rate
- Press 'Add Customer'
- Create a new category under 'Taxes' for CIS
- Apply the 'UK Domestic Reverse Charge' VAT rate, refer to this guide to enable this rate: UK VAT rate guide
- Increase a portion of the transaction by adding the 680 to the -2720, which will give you the result you are expecting of £3400
The Sales Receipt will show the CIS deduction:
Below is the gross value of the expense:
Your VAT return will accurately display the VAT:
Example 2
- Gross invoiced amount: 2627.00
- CIS deduction: £90
- Balance paid: £2537.00
To create a customer invoice for a CIS deduction:
- Enable the relevant VAT rate (UK domestic reverse charge no VAT): UK VAT rate guide
- Create your invoice with the gross amount
- Enter 'CIS Deduction included' in the 'description'
- Finalise the invoice by downloading it
- Go to the 'Customers' page
- Open the same customer
- Press 'New Actions' > 'New Credit Memo'
- Add a new product/service called 'CIS'
- Populate the details of the credit memo
- Apply the correct reverse rate VAT rate
- Press 'Done' and finalise your credit memo by downloading or emailing it to the customer
- Locate the invoice from your invoices page
- On 'Page 2' of the invoice, press 'Use a credit note':
- Once selected, press 'Done' to save
- Go to your bank transaction and press 'Split/Attach' to match the invoice to the payment
- Your VAT return will report the gross payment along with the CIS deduction in the credit memo