CIS opening balances CIS was previously deducted on payment (Sage 50)

Follow the process outlined here if you have outstanding invoices from your previous system, and want to include them on CIS reports and returns produced from Accounting. Your CIS reports and returns will not be accurate unless you follow this process.

  • This article explains how to enter your opening balances if your previous system did not deduct CIS until an invoice was paid.
  • For example, for an invoice for £100 labour plus VAT, the CIS is not deducted until the invoice is paid. The outstanding balance does not reflect the CIS deduction and remains £120.

  • This process is used on systems such as Sage 50.

If CIS was deducted from your sales and purchase invoices, such as with Quickbooks or Xero, follow the process outlined in this article: CIS opening balances when CIS was previously deducted from invoices

Things to consider

  • To include and report on CIS on outstanding invoices from your previous system, you must re-enter these invoices using the CIS functions and ledger accounts set up in Accounting.
  • We may handle the CIS deductions in a different way to your current system.

    In Accounting, we deduct the CIS from the total value of the invoice, when a sales or purchases invoice is saved. Your previous system may not deduct the CIS until an invoice is paid. Don't worry, we still don't include invoices on reports or returns until they are paid.

  • We may record your CIS in different ledger accounts to the system you have come from, and this will affect the way you enter your opening balances.

    See How CIS transactions update your ledger accounts

Before you start

About entering opening balances

As all outstanding invoices with CIS must be re-entered in Accounting, you'll need to follow this process to enter your opening balances correctly.

  1. Enter opening balances for customers, suppliers and ledger accounts.
  2. Reverse your outstanding CIS invoices with a credit note, to remove the value of CIS invoices prior to re-entering them.
  3. Allocate the credit note to the opening balance, so it doesn’t show as a credit on your customer or supplier account.
  4. Re-enter your outstanding CIS invoices so:
    1. The CIS is deducted correctly on the invoice.
    2. These CIS invoices are included on returns and reports, so you can submit to HMRC.
    3. The correct ledger accounts are updated.

Reporting CIS with invoices from both systems

You may have some CIS invoices that are already paid from your old system as well as some unpaid ones for same period. This means you'll have a mixture of invoices from both systems for the same reporting period. When this happens:

  • Follow the instructions outlined here but do not submit your CIS return from Accounting.
  • Create the CIS return in Accounting for the invoices entered as opening balances.
  • Create another CIS return from your old system for the CIS invoices already paid.
  • Add the two reports together and submit your return directly via Government Gateway.

Opening balances for CIS on sales invoices

Enter your customer opening balances

Enter the opening balance for each customer that is also a contractor. You can enter this as a single overall total or enter multiple outstanding balances for the same customer.

Tip

  • If you have sent CIS and non-CIS invoices to the same contractor, consider entering two opening balances, one for the total of non-CIS invoices, and one for the total of CIS invoices. This makes it easier to allocate the credit notes later.
  • Consider entering each outstanding invoice as a separate opening balance, if there aren’t too many. This makes it easier to allocate credit notes later.

In our example, we have three outstanding invoices with our contractor with a total balance of £360.

How to enter a customer opening balance

  1. From Settings, then Business Settings, go to the Opening Balances section.
  2. Select Customers.
  3. Select New Opening Balance.
  4. Enter the details.
  5. The Total is the opening balance for your customer.

If you're entering more than one opening balance, repeat for each opening balance and for each customer.

You can easily adjust the opening balances if you make a mistake. Just select the opening balance and make the required changes.

Enter opening balances for nominal ledger accounts

Next make sure you've entered the opening balance for your ledger accounts. This is usually taken from the final trial balance used in your old system.

For your CIS invoices, you will have an opening balance for the Trade Debtors, VAT, as well as the ledger accounts you used to record the sale on your original invoices.

Your Trade Debtors opening balance will be populated with the customer opening balances already entered.

Enter nominal ledger opening balances

  1. From Settings, then Business Settings, select Nominal Ledger from the Opening Balances section.
  2. Make sure you have opening balances for:
    1. Sales - Credit
    2. VAT on Sales - Credit
  3. Save the opening balance.

In our example, if we just had one customer, our opening balance would look like this:

Ledger Account Debit Credit
Trade Debtors 360  
Sales  

300

VAT on Sales  

60

You can easily adjust the opening balances, if you make a mistake. Just open the opening balance and make the required changes to the ledger account or amount.

Reverse your unpaid CIS invoices

To make sure your outstanding CIS invoices are reported correctly on CIS reports and returns, you must re-enter them in Accounting.

Before you can do this, reverse your outstanding balance for each CIS customer with a credit note.

  1. From Sales, select Quick Entries.
  2. For the Type, select CR Note.
  3. Select a CIS customer with an outstanding balance.
  4. Enter the following information:

    Date Enter your start date in Accounting.
    Ledger account

    Choose the same ledger account as the original invoice.

    This is to make sure the balance of the ledger account is reduced correctly.

    Amount

    Enter the Net outstanding balance

    In our example, this is £360.

    VAT

    If you're on the standard VAT scheme, select the VAT rate used on the original invoice.

    This is added to your VAT return but then reversed when you re-create your CIS invoices.

    Your opening balances will be reduced by the amount of your outstanding CIS invoices.

    Ledger Account Debit Credit
    Trade Debtors 360  
    Sales  

    300

    VAT on Sales  

    60

    If you check your trial balance, you'll now see your CIS opening balances are reversed.

    In our example, we only entered opening balances for our single CIS invoice, so the trial balance now shows zero.

Allocate the credit note to your opening balance

This is to make sure the credit note is not left outstanding on your customer's account.

  1. Select Contacts then select the required contact.
  2. Select Manage then select Account Allocation.

  3. Choose the opening balance for your customer.
  4. Select the credit note and the opening balance using the check boxes, then Save.

Re-enter your CIS invoices

Now that everything has been reversed, you just have to re-enter your CIS invoices. Enter each invoice individually as you'll need to know when it's paid and make sure the CIS is reported correctly.

In our example, we have three invoices for £100 labour.

This will:

  • Update your Trade Debtors with the invoice values less the CIS withheld.
  • Update the CIS Tax Liability with the amount of CIS withheld.
  • Update the CIS Labour with the net value.
  1. From Sales, select Sales Invoices.
  2. Select the CIS customer with an outstanding balance.
  3. Enter the following information:

    Date Enter your start date in Accounting. This should be the same date that you used for the credit note.
    Ledger account

    Choose the ledger account for CIS Labour.

    This is to make sure that CIS is deducted on the invoice and the correct ledger account is updated.

    Amount

    Enter the amount charged for Labour.

    In our example, this is £100.

    VAT

    If you're on the standard VAT scheme, select the VAT rate used for the original invoice.

    This reverses the VAT entered on the credit note.

  4. If you also charged for materials, enter this on a second line using the CIS Materials ledger account.
  5. Check that the CIS has been deducted from each invoice.

  6. Save the invoice.

Repeat for each CIS invoice.

In our example, the ledger accounts are updated for each invoice as follows:

Ledger Account Debit Credit
Trade Debtors 90  
CIS Tax Withheld 30  
CIS Labour  

100

VAT on Sales  

20

In our example, once we've entered all three invoices, our opening trial balance looks like this:

Enter opening balances for purchase invoices

Enter your supplier opening balances

Enter an opening balance for each supplier that is also a subcontractor. This is the total balance of all outstanding invoices. You can enter this as a single overall total or enter multiple outstanding balances for the same supplier. The total of all opening balances automatically updates your Trade Creditors ledger account.

You'll need to enter the total amount outstanding, but it's only the total of CIS invoices that we're interested in for the rest of the process.

Tip

  • If you have received CIS and non-CIS invoices from a subcontractor, consider entering two opening balances, one for the total non-CIS invoices, and one for the total of CIS invoices. This makes it easier to allocate the credit notes later.
  • Consider entering each outstanding invoice as a separate opening balance, if there aren’t too many. This makes it easier to allocate credit notes later.

In our example, we have three outstanding invoices from our subcontractor with a total balance of £360.

Enter a supplier opening balance

  1. From Settings, then Business Settings, go to the Opening Balances section.
  2. Select Suppliers.
  3. Select New Opening Balance.
  4. Enter the details.
  5. The total is the opening balance for your supplier.

If you're entering more than one opening balance, repeat for each opening balance and for each supplier.

Enter nominal ledger opening balances

Next, make sure you've entered the opening balance for your ledger accounts. This is usually taken from the final trial balance used in your old system.

For your CIS invoices, you will have an opening balance for the Trade Creditors, VAT, as well as the ledger accounts used to record the labour and materials on your original invoices.

Your Trade Creditors opening balance will be populated with the opening balances already entered for each supplier (subcontractor).

Enter nominal ledger opening balances

  1. From Settings, then Business Settings, select Nominal Ledger from the Opening Balances section.
  2. Make sure you have opening balances for:
    1. Sales - Debit
    2. VAT on Purchases - Debit
  3. Save the opening balance.

In our example, if we just had one supplier, our opening balance would look like this:

Ledger Account Debit Credit
Trade Creditors   360
Purchases

300

 
VAT on Purchases 60

You can easily adjust the opening balances if you make a mistake. Just open the opening balance and make the required changes to the ledger account or amount.

Reverse your unpaid CIS invoices

To make sure your outstanding CIS invoices are reported correctly on CIS reports and returns, you must re-enter them in Accounting.

Before you can do this, reverse your outstanding balance for each supplier with outstanding CIS invoices using a credit note.

  1. From Purchases, select Quick Entries.
  2. For the Type, select CR Note.
  3. Select a supplier (subcontractor) with an outstanding balance.
  4. Enter the following information and Save.

    Date Enter your start date in Accounting.
    Ledger account

    Choose the same ledger accounts as the original invoice.

    This is to make sure the balance of the ledger account is reduced correctly.

    Amount

    Enter the Net outstanding balance.

    In our example, this is £360.

    VAT

    If you're on the Standard VAT scheme, select the VAT rate used on the original invoice.

    This will be added to your VAT return but then reversed when you re-create your CIS invoices.

    Your opening balances will be reduced by the amount of your outstanding CIS invoices.

    Ledger Account Debit Credit
    Trade Creditors   360
    Purchases 300

     

    VAT on Purchases 60

     

    If you check your trial balance, you'll now see your CIS opening balances reversed. In our example, we only entered opening balances for our single CIS invoice, so the trial balance now shows zero.

Allocate the credit note to your opening balance

This is to make sure the credit note is not left outstanding on your supplier's (subcontractor) account.

  1. Select Contacts then select the required contact.
  2. Select Manage then select Account Allocation.

  3. Choose the opening balance for the supplier.
  4. Select the Credit Note and the opening balance using the check boxes, then Save.

Re-enter your CIS invoices

Now that everything has been reversed, you just have to re-enter your CIS invoices. Enter each invoice individually as you'll need to know when it's paid and make sure the CIS is reported correctly.

In our example, we have three invoices for £100 labour.

This will:

  • Update your Trade Creditors with the invoice values less the CIS.
  • Update the CIS Tax Liability with the amount of CIS.
  • Update the CIS Labour Expense with the Net value.
  1. From Purchases, select Purchases Invoices.
  2. Select the CIS supplier with an outstanding balance.
  3. Enter the following information:

    Date Enter your start date in Accounting. This should be the same date that you used for the credit note.
    Ledger account

    Choose the ledger account for CIS Labour Expense.

    This is to make sure that CIS is deducted on the invoice and the correct ledger account is updated.

    Amount

    Enter the Net value of your outstanding CIS invoice.

    In our example, this is £100.

    VAT

    If you're on the Standard VAT scheme, select the VAT rate used for the original invoice.

    This reverses the VAT entered on the credit note.

  4. If you were also charged for materials, enter this as a second line, using the CIS Materials ledger account.
  5. Check that the CIS has been deducted from each invoice.

  6. Save the invoice.

Repeat for each outstanding CIS invoice.

In our example, the ledger accounts are updated for each invoice as follows:

Ledger Account Debit Credit
Trade Creditors   90
CIS Tax Liability   30
CIS Labour Expense

100

 
VAT on Purchases

20

 

In our example, once we've entered all 3 invoices, our opening trial balance looks like this: