[Recording and Reporting]Construction Industry Scheme for the United Kingdom in MSD365-Part 2

Dear Dynamics 365 Lovers,

Following my blog on the Construction Industry Scheme for United Kingdom (Part 1) [How to Setup] Construction Industry Scheme for the United Kingdom in MSD365-Part 1

This blog is part 2 and final blog on the same topic, let’s explore.

In this blog we shall discuss about the below, and make sure to complete all the necessary configuration articulated in the part 1.

1. Processing CIS transactions
2. Reporting CIS deduction to Her Majesty’s Revenue & Customs (HMRC) in the United Kingdom

Processing CIS transactions

We shall see Cost invoice without purchase order (AP- Invoice- Invoice journal)

Using vendor with Standard rate 20% Withholding tax, which we have prepared earlier in part1.

While booking invoice, we must select the “Calculate withholding tax” to Yes and select the Item Withholding tax group from the list

This will work like, Withholding Tax group from Vendor master and Item withholding tax group from the invoice, will give the tax code (20% in this case)

Post the invoice

Note- For Purchase Order Invoice, user don’t need to setup anything in PO journal, this is because the combination of Withholding tax group and Item withholding tax group comes from Vendor master and Item setup, we have done this setup previously in part 1

Now at the time of payment to the vendor for the invoice, the deduction will happen

Create payment proposal

System will notify the deduction and we can see the Withholding tax amount from the ‘Withholding tax’ option, see below.

On the same page, user can see the withholding tax before creating payment proposal 

After that above creation, payment will be deducted and it will bring the payable- Withheld money (1000-200=800 in this case)

Once the payment is done, user can send the statement to subcontractor, it will allow them to show the deduction to their tax authority for deduction

Reporting CIS deduction to Her Majesty’s Revenue & Customs (HMRC) in the United Kingdom

As pet the legislation, the monthly CIS will be reported to Her Majesty’s Revenue & Customs (HMRC) in the United Kingdom

Now we shall see how to settle the CIS statement and send this to HMRC (sending to HMRC, business user must know how to submit in their portal)

To settle monthly CIS- user need to go to Tax- Declarations- Withholding tax- Withholding tax payment

While posting settlement, user must make sure to use Update= Yes, it will generate the CIS payment

The below report can be sent to HMRC as per the legislation.

The payment transaction/voucher can be seen and checked from the Tax- Inquiries and Reports- Withholding tax inquiries- posted withholding tax settlements

+Bonus Reports 

User can get the monthly CIS statement from various reports as follows and send that to HMRC 

Vendor Monthly CIS statement 

Accounts Payable- Inquiries and reports - Vendor reports- Vendor monthly CIS statement 

User can also check the report  From tax- Withholding tax reports- Withholding transactions

This is it for this topic, I would like Consultants to go through the above carefully and refer while implementing the solution.