Let's say the bill is for £400 and you're going to pay your subcontractor £300 and then pay £100 to HMRC.
Post the bill for £400.
3 Pay off the bill
When you pay your subcontractor, you'll see a payment of £300 coming out of your main bank account.
Don't explain this as a bill payment. Instead, explain it as a transfer from your main account to the CIS bank account.
4 Add a manual bill payment
Navigate to the 'Banking' tab, select 'Bank Accounts' from the drop down menu and choose the CIS bank account from the list of accounts.
Select 'More' and then 'Add Transaction' to enter a manual bill payment from the CIS bank account for £400, to pay the bill off in full.
This is so that your accounts won't have a permanent unpaid bill sitting in Aged Creditors.
5 Pay the tax
When you pay the CIS tax from your main bank account, explain that as a Payment with type PAYE / NI, because that's how you'll pay HMRC.
6 Net off the PAYE and CIS account
That will leave your PAYE account showing a debit of £100 and the CIS bank account showing a credit of £100. We need to net these off, and the best way to do that is by navigating to the 'Banking' tab, selecting 'Bank Accounts' from the drop down menu and choosing the CIS bank account. Then, enter a manual transaction, a refund, of £100, with type PAYE / NI.
Here's what your bank account will look like after you've posted all these transactions...
... and your CIS deductions account.
Further information about the CIS is available from HMRC.
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