Reverse Charge CIS Scheme. What figure to enter into the 'amount field for labour.

Hi CassMep Thanks for reaching out to us here on the Community. If you're due to receive £480, we presume you're on the 20% standard CIS rate, you would have to enter £600 in the amount field this would then subtract the 20% CIS amount that has been withheld and would then show as the balance due as £480.

Thanks for responding.

So if I am CIS registered and working as a subcontractor for a contractor. I need to add 20% to my rate due for any labour when completing the invoice to the contractor. They will then deduct 20% off when they pay the bill to me?

or is it that I just enter the amount of money for labour that is due (without adding anything on) and they deduct 20% reverse charge CIS rate from my bill and pay it on my behalf. I then need to reclaim this through my tax return?

It is all very confusing.

Hi Cassmep Yes correct if you're CIS registered you should activate the CIS option within the settings: select the cog/gear icon > account and settings > advanced > Construction Industry scheme (CIS) > Enable CIS > enter the details accordingly and select the relevant CIS percentage > save. You would also have to select the 'Is a CIS contractor' option within your customer/contractor details. When you then create an invoice, select the customers/contractors name the relevant CIS (%) product/service will populate, a 'Less CIS' box will be included and when you enter the 600 in the amount column the relevant CIS amount will be automatically populated and the amount due, 480 will be shown. Please note the CIS percentage rate only applies to the labour proportion of the invoice, not materials. We've included an article that references the above: https://intuit.me/4ebd9jH 

The CIS reverse charge VAT codes will be applied to your VAT return and appear in box 6. We've included an article that references this:https://intuit.me/4c9xGU3

If you have any further questions please reach out to us and we'll be happy to help.

Hi @CassMep 

CIS & VAT Reverse Charge work together but they are two, separate, things.

If you have CIS activated (as @John C 's explanation above) QBO will do the background stuff but it's worth having a good grasp as there are some CIS things that QBO gets completely wrong (credit notes, for example).

Say you're charging 10hrs Labour at £20/hr.  You should invoice £200.  The contractor will deduct 20% of this (£40) to send to HMRC on your behalf.  Essentially, HMRC doesn't trust you to pay your own taxes so they enlist your clients as tax collectors.

Every month, your client must send you a Statement of Deduction.  Keep these safe - they are your proof that you have paid that amount in tax - a sort of voucher.

If you have set it up correctly, QBO also deducts 20% from the amount owing on that invoice & keeps it in a separate account (I can't remember what it's called off-hand ... CIS Withheld maybe?).  These amounts can be used to offset against end of year tax.

Reverse Charge VAT - this is the part where the fun really happens!

There are all sorts of ridiculous rules that determine whether a supply is inside or outside of RCVAT.  HMRC started with the idea (again, due to a lack of trust) but then got itself tied in knots with the exemptions - so it ended with a complete dog's dinner!

If your supply is inside the scope of RC VAT, use the RC CIS 20% on the invoice & QBO will make the correct adjustments to the VAT Return.

What QBO will not do (& really should) is automatically add a note to the invoice to tell the customer that RC VAT has been applied - you'll have to add this manually or add to your invoice template.

HMRC does have some decent webinars available for both CIS & RCVAT that run through the basics if you need guidance.

Hope this helps.