CIS deductions taken from you

As a subcontractor, your contractor pays you net: it withholds tax on the labour part of the invoice and pays that to HMRC on your behalf.

The invoice is discharged in full - only part of it arrives as cash.

Invoicing a CIS job

1. Create the invoice as normal.
2. Turn on the this is a CIS job switch.
3. Set each line to Labour or Materials.

Only labour is deductible. Materials pass through untouched, which is why the split has to be on the line rather than on the invoice.

The domestic reverse charge for construction also applies to what a subcontractor invoices - see VAT boxes explained.

Recording the deduction

When your contractor pays you, they must give you a payment and deduction statement. Record what it says:

1. Open the sent invoice.
2. In the CIS panel, enter the deduction from the statement.

Kontala then:

• Settles that part of the invoice, so what you are still owed is right.
• Posts the deduction to your ledger on the treatment your business type calls for.

Recording a deduction is a third way an invoice gets settled, alongside a payment and a credit note. The cash you actually banked is matched separately in Banking.

Where the deduction ends up

This depends on your legal form, and the two treatments are opposites:

• A limited company. The deduction is money HMRC owes you. It builds up as a receivable and is set against the PAYE and CIS the company owes each month.
• A sole trader, partnership or landlord. The deduction relieves the owner's own Income Tax and Class 4 National Insurance. It is recorded as drawings, and totalled on box 81 of their Self Assessment return.

If no business type is recorded, Kontala refuses the deduction rather than pick a treatment. Set it on Company details.

Seeing the total

Go to Tax, then CIS, and open Deductions taken from you. It totals what has been withheld from you, month by month, across the tax year.

Related

• Record your CIS role
• Adjustments and allowances
• Create an invoice