What is CIS?
CIS stands for Construction Industry Scheme. Sub-contractors who work in the construction industry have CIS deductions taken from their earnings by the contractors who pay them. The contractors are then responsible for declaring these deductions and paying them on to HMRC, which reduces the amount of tax that the sub-contractor pays at the end of the year.
If CIS deductions apply to you, you'll need to amend your bookkeeping to reflect this. Here's a run-down on how to do this in Pandle.
Showing CIS in Pandle as a subcontractor
Pandle does not yet have a specific CIS function (this is currently under development). In the meantime, this method will help you keep track.
Our example shows a sub-contractor's invoice to a contractor for £1,000. The contractor deducts £200 CIS tax.
Create a new bank account in Pandle, and name it 'CIS Deducted' or something similar, and set the entry method to manual.
Create your invoice as normal in Pandle. Our example is an invoice for £1,000.
Your contractor pays their invoice, and deducts £200 in CIS tax, so you receive £800 into your bank account.
Process this as a Customer Receipt and offset it against the invoice as normal.
This still leaves £200 outstanding on the invoice, because the contractor deducted CIS tax when they paid your invoice.
To account for this, you'll need to go back to the bank account you set up in Pandle called 'CIS Deducted'.
Enter a manual transaction for a Customer Receipt transaction, for the remaining balance of the invoice. In our example this is £200.
What it means for your tax return
The 'CIS Deducted' figure shows the tax that you have already paid, so your tax return should reflect this. At the end of your financial year, check that the balance, and then reset it to zero ready for the following financial year. The process for this depends on what type of business structure you operate as.
Enter a manual transaction through your 'CIS Deducted' bank account as a 'Money Out' transaction for the full amount that shows on the 'CIS Deducted' account.
The date of the transaction should be set to your year end.
Categorise this transaction as 'Drawings'.
If you have a limited company
If your CIS tax is refunded each year, select the 'CIS Deducted' bank account as the category to reduce the balance owed to you when processing the money into your business bank account.
If you offset the CIS deducted against your PAYE bill to HMRC you can simply include an additional line in your wages adjustments to show the reduced liability. You may want to ask your accountant for help with this.