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Hello,
I have a UK client with the following scenario. Received an invoice with two lines. Labor at 11,250 pounds and materials at 44,632.62 pounds. This invoice needs to have a CIS deduction on the labor of 20%. What is the best way to calculate and record the CIS 20% deduction while still properly recording the VAT amount?
Thanks
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Hi,
Technically the deduction is from the payment and not the invoice. I believe that to properly record the transaction, you need to record the invoice exactly as it is presented. Therefore there should be no issues with VAT etc. (but if you are having difficulty recording VAT as it is on the invoice, let me know).
When you come to pay the invoice, you need to deduct the 20% (or 30% etc. depending).
One way to do this is to process a Payables Credit Memo against the vendor for 20% of the Invoice and apply it immediately against the invoice. Now when you come to pay, only the balance will be paid. The credit Memo should be credited to a GL account set up to track what is owed to HMRC. To pay the HMRC, enter a Bank Transaction debited to the GL account used above.
Another option is to use the withholding tax functionality in GP. This will deduct an amount automatically from a vendor payment when the invoice is being paid in full. If its a part payment you need to do the calculation yourself manually in the Apply window.
Best regards,
Ian.
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