CIS Tax Suffered

Hi there, Kaz.

Collecting and tracking the correct CIS tax amount is essential for accurate reporting. I'm here to share info about handling the incorrect contractor's payment and ensuring this gets tracked in QuickBooks Online.

Generally, the contractor is responsible for calculating and deducting the payment owed to HMRC on behalf of a subcontractor. However, since they have assured you that they'll deduct the 20% CIS labour tax amount in the following month, you can consider receiving the gross amount with the 20% CIS labour tax and create an adjustment entry using a journal entry.

To properly handle this, I recommend collaborating with your accountant to determine the best approach for the CIS tax suffered (which is auto-deducted when payment is received). If you don't have an accountant, you can find one through this link: Find an accountant.

Alternatively, we can track the gross amount paid by your contractor by using the Receive Payment feature. Here's how:

1. Go to + New and then select Receive payment.
2. From the Customer dropdown, add the name of the contractor.
3. From the Payment method dropdown, select the payment method.
4. From the Deposit to dropdown, select the account you put the payment into. 
5. In the Outstanding Transactions section, select the correct invoice.
6. Enter the exact amount paid by your contractor, not the invoice amount.
7. Click Save and close.

After that, the system will create a credit for overpayment. Then, you can apply this credit to the following month. 

Since it's our goal to ensure everything's tracked accurately in the program, consulting an accountant is necessary to avoid messing up your CIS record and reporting.

Additionally, I've added these resources to help you learn how the CIS feature works in QuickBooks Online:

• CIS guide in QuickBooks
• Already using CIS in QuickBooks?

Finally, you can run three reports in the program to view details of the payments made to subcontractors, a statement to break down all the payments with deductions, and a summary of the CIS deductions withheld by your contractors for the selected period.

This thread is always open if you need assistance tracking your CIS tax and running CIS reports. My team and I are ready to help you out.

Hi @Kaz24 

Ignore everything in the previous reply - it's bot-rendered gibberish!

Do you use QBO to send weekly/monthly invoices to your Contractor & they pay on these invoices?

Or do you use Bank Account matching & Sales Receipts to log things into QBO?

If Invoices/Payment, you will have sent them an invoice as usual & they've overpaid. Don't worry too much about CIS at this stage (QBO doesn't deal with it correctly anyway).

Use Receive Payment to enter the payment at full amount but only select last month's invoice - QBO will clear that & leave the overpayment as a credit on their account.

Next month, use Receive Payment to enter the (under)payment & use the remaining credit to clear the invoice in full.

I don't use Bank Matching / Sales Receipts but let me know & I'll rethink the above.

Now for the CIS bit:

Caveat ... I don't actually use QBO to file CIS so this may be a bit vague (as above, Intuit/QBO have no idea how it works & no apparent interest in getting it right so I steer clear).

QBO accounts for CIS on invoices sent not on payments received (which is wrong), so the CIS on the overpayment will be carried over to next month.  This is fine - as long as you can show what's happened is genuine, not even HMRC will get in too much of a tizz over it.

(it might be a bit more complicated if you're off-setting CIS Suffered against PAYE or Corporation Tax & the two month's straddle the end/start of the tax year / your financial year)

Hope this helps.