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Cis invoice example for Accounting and Tax

hello and welcome to the subcontractor under construction industry demo that I'm going to do for you okay so this is the demo company within Xero I am using Xero accounting software and in order to set up the construction industry side in a business if you haven't set it up already I'm now going to show you how to do that so in the accounting tab at the top here and you go to advanced you go to financial settings and in here will give you all of your tax part so it's levy 80 and here you've got construction industry scheme so it enables the CIS in your chart of accounts so that you can follow the CIS monthly return so it tells you asks you here if you are a registered contractor or if you are a registered subcontractor now we are setting at the moment that we're doing this as an we are a registered contractor so that means we employ subcontractors to carry out work so I'm going to tick that here and in here you need to put in the unique tax pays reference for the company the Accounts Office reference and then the employers PA ye reference and once those have been added it will enable then the chart of accounts to read the CIS deductions so I've entered in just some made-up unique taxpayer reference account reference and the PA ye reference and then you just click Save at the bottom it will tell me then that the financial settings for the demo have been updated so now I'm going to go into the chart of accounts so you can actually see what I mean by the additional nominal codes that have happened so here now you have the CIS labor expense and the CIS materials purchased now I'm going to add a contact and add in their details for the subcontractor that's going to be working for said client so I'm now gonna go to contacts or contacts I'm going to add a new contact and I'm gonna call him Jack Smith and if I scroll down it's now giving me the financial details a CIS contractor subcontractor enabled deductions and we took yes then once we've verified the subcontractor in here it will give you gross which is the zero percent means you don't need to do any deductions the standard is 20 and the higher rate is 30% so I'm going to put in 20 organization type is a sole trader his National Insurance number the unique taxpayers reference and the verification code which I believe is one two three four five six seven eight nine ten and now I'm going to leave all the rest of it because that's that's totally different at the moment save contact and verify CIS details so in here you can actually verify through the HMRC website straight from here so if I just click on this I don't think it will go through to the HMRC website but it will tell you to verify the subcontractor you need the COAS contractor add-on so the subcontractor role will is required to add this to your subscription so you can do that and it costs at five pounds per month but you can alternatively go into the HMRC government gateway to add them and verify them as well which I will show you in a different demo how to actually verify a subcontractor so I'm going to return to contact and I'm just gonna go save for the moment so now I'm going to add a purchase invoice from Jack Smith to us for his services so I'm gonna go and add a bill so I'm going to date it for today due date in 7 days so I can put plus 7 in here and that will just give me 7 days on top of the one that we've put in in the date reference I'm just going to put in here invoice 0 0 1 I'm going to put on here labor because we verified him as 20% I'm going to put in here a thousand pound and I'm going to start putting in labor so there you are see is labor that's come up he is not that registered so I'm going to put that as 0 rated and as you can see now the thousand pound it's then taking out the CIS deduction of 20% and it now leaves me with an 800 pound that I need to send to Jack Smith so it's already made the deduction of 200 pounds I'm now going to add another contact and do them at different rates so you can see so I'm going to add a new contact and now I'm gonna put in here Joe Bloggs come down to see is enable deductions the CIS rate I'm going to do it 30% because he wasn't now sometimes when they're not verified or they can't be verified you do it at the higher rate and that does come up sometimes within HMRC it could be that they're a new subcontractor and HMRC website has an updated yet it could be that we might better digit wrong within the unique taxpayers reference or their national insurance number so there might be a few did denominators as regards to what might not happen so or it might be that they have been verified and HMRC are saying no we need to do it at the higher rate and they will tell you that but you'll see that in the other demo that I will be doing as regards to verifying each individual subcontractor so the organization type is a sole trader he's now a surance number is JX and in save and then I'm gonna do the same here and add a bills we've had a purchase invoice from him I'm gonna put seven days labor in the description pound and then it will be CIS labor he's zero rated but and then you see it's deducted 30% which is now 300 which we're only do to pay seven I'm gonna prove that and now I'm going to show you how a CIS return will be how our CIS return is now processed within zero so to quickly give you an overview of the additional nominal codes that have now been entered into the chart of accounts once you've set up the organization for CIS these are the additional accounts that are actually now present within my chart of accounts so I've got CIS labor income CRS labor expense sea-ice materials purchased the CIS asset and the CIS liability and just to show you that once the CIS is enabled for an organization it can't be disabled so make sure you understand how CIS in Xero works before you set it up nine times out of ten whenever I set it up I know that these it's what we need to be set up for future so you in theory it never ever needs to be disabled so just a bit as a warning it needs to be done so in order to be able to run my CIS reports I need to obviously pay them first so as you can see we're paying them today I know it's a week early from what we put in the purchase invoice but these are the two payments and it's obviously intelligent enough to bring up those two invoices that are ready to reconcile so I'm just gonna reconcile these two and then I'm going to now go up into my accounts and in my reports and my cos contracts are my monthly return me online filing on my statements and it tells me now that I've got 500 pounds of pay which was the 20% at 230 percent the 300 that's my 500 pounds so if I click into this I can download a statement which is quite useful I'm just gonna go show you for that for the moment open it up so you can see what it looks like so this is the construction industry payment deductions statement that we need to send to our contractors for that particular month now I've downloaded and saved in the unit section a HMRC form which is the same thing which you can actually override but zero actually do their own deduction statement for you and this is basically what this looks like I come out of this so those are the downloads for the statements this is the amount Marcos submitted so this is where you can submit your return through the HMRC gateway can down line download the payment deduction statements so you can send them to your subcontractors and you can email payment and deduction statements to each subcontractor if you've got their email already in Xero itself in the contacts to file the direct to HMRC state to send statements as a bulk you need to make sure that the CIS contractor add-on is part of the subscription which costs obviously five pounds a month and you can add CIS subcontractor sorry CIS contractor to subscriptions here so the page is not found and that's purely because it's a demo it's a demo site so we've marked it has been submitted you can go into HMRC website and actually do it through the company and submit those and I will show you how that's done shortly so this concludes pretty much what Xero is quite capable of doing as this is not set up as I say with the subscription because it's a demo company then you can't see how it basically submits so you just put your gateway ID in your passwords you click Submit and it will actually send it via zero so you don't actually need to go through the HMRC website as it's through the HMRC website as it is so pretty much this is how the reports for the CIS subcontractor sorry the contractor for the subcontractors there's also the monthly return that you can actually print off as well and it will tell you here that this was the toll payments and total payments excluding that then the liable of deduction and then the amount withheld so this is the amount that you've taken off of your subcontractors and that's your what you're going to be now paying on the 19th of every month it's Joe you need to submit and pay so that's always around the 19th of the month but yeah this is pretty much what Xero can do it's quite self-explanatory quite straightforward I absolutely love zero it's one of my favourite accounting software but if you do have any problems as regards to the CRS side if you are using Xero then please let me know alternatively have a look in the Facebook group to see if there's anything additional that might be I might be adding but until then hopefully this will be very good for you quite interesting and as I say let me know if there's any problems Cheers bye