CIS Construction Industry Scheme

There are two sides to this, either A) You are a sub-contractor, or B) You are employing a sub-contractor. Both cases use an example of an invoice for 117.50 including VAT at 17.5% and Tax at 20%.

Case A: You are a sub-contractor:

You will need two transactions every time you issue an invoice for sub-contract work where CIS tax is taken. You will also need to set up 2 new accounts as follows:

  1. CIS Sub-contract Work (in the Sales Group)
  2. CIS Tax Paid (either in the Current Assets Group or preferably in a new Expenses Group called CIS Tax Deductions Group)

The two transactions required:

  1. In Sales Transactions (or via an Invoice): From CIS Sub-contract Work To Invoices Unpaid for 117.50. Use the applicable rate of VAT (if relevant)
  2. In Transfer Transactions: From Invoices Unpaid To CIS Tax Paid for 20.

The result in the P&L is CIS Sub-contract Work 100, Invoices Unpaid 97.50 and CIS Tax Paid 20.

When you receive the money from your contractor, make a Transfer Transaction From Invoices Unpaid To Bank for 97.50

Case B: You are the employer:

You will need 2 transactions every time you receive a bill from the sub-contractor. You will also need to set up 2 new accounts as follows:

  1. CIS Sub-contractor Expenses (in the Expenses Group)
  2. CIS Tax Unpaid (in the Current Liabilities Group)

The two transactions required:

  1. In Purchase Transactions: From Bills Unpaid To CIS Sub-contractor Expenses for 117.50. Use the applicable rate of VAT (if relevant).
  2. In Transfer Transactions: From CIS Tax Unpaid To Bills Unpaid for 20

The result is a P&L showing 100 as expenses, Bills Unpaid of 97.50 (which is 80+VAT to your sub-contractor) and CIS Tax Unpaid of 20.

When you eventually pay the bill and tax it is a Transfer Transaction From Bank To the relevant Current Liability account (CIS Tax Unpaid and Bills Unpaid).