CIS Tax and Sage

Despite the influx of online accounting software such as Clearbooks and Xero, many of our clients still like to use offline programmes such as Sage and QuickBooks. We are competent with most programmes, and are happy to deal with whichever our clients are most comfortable with.

We are often asked how to treat certain accounting elements using various software. One such problem we have recently been asked is how to deal with CIS tax deductions for subcontractors using Sage Accounts. Our client had received payment of some invoices minus the normal 20% deduction of CIS tax on the labour element of the invoice.

There are many solutions to this problem, however, we are firm believers of making matters as simple as possible, and therefore for this client we recommended the following solution. As with most bookkeeping issues, there is rarely a “one size fits all” solution in these areas, so please contact us if you would like to know if this is suitable for your needs.

For our client we wanted to make matters as simple as possible to ensure aged debtors are cleared properly when invoices are paid (removing the CIS element that remains “unpaid”) and ensuring that the bank is correct showing the banking net of CIS tax. Out solution was as follows:

1) Set up a nominal code for CIS deductions in the profit and loss codes (say 5005 – it makes no real difference).

2) When a receipt is made for the payment of the invoice which has suffered CIS tax – treat it as paid in full. Ignore the CIS tax deducted. This will then show as clearing the debtor, and a full receipt to the bank.

3) Make a journal for the CIS tax deduction. For this you will need to debit the CIS tax deductions nominal set up in (1), and to credit the bank. This reduces the amount which was actually banked to the correct level (i.e. net of CIS tax). Make a reference as invoice number/name so it can be tied up when preparing the accounts as CIS deductions are very important in the accounts and tax return preparation.

4) When you reconcile the bank beware that it will require you to look at a banking which doesn’t exist (i.e. gross) and a bank payment which won’t be on the bank statement (i.e. the journal for the CIS deduction). However, if both are dated the same date, it should be pretty clear/obvious especially if you keep on top of matters!

5) Marvel at your work showing the correct bank and debtor reconciled and make yourself a congratulatory cup of tea. Eat a biscuit or two.

Easterbrook Eaton Limited are members of the Sage Accountant’s Club, have the first two Certified Clearbooks Trainers in the South West and have over a decade of experience with QuickBooks. Please contact us on any software questions on 01395 516658 or visit our website at www.easterbrooks.co.uk.  

Bookkeeping in the Cloud

Remember the days when you used to back-up your accounts onto a 3.5” floppy disk, ready to send to your accountant so they could prepare your accounts for the year? And how often the backup was too large so spanned 2-3 discs and more often than not data was corrupted and required you to send in another copy? Technology has advanced a lot in the last few years, and there are specific advancements that could benefit you (and save you time and money) when keeping your accounting books and records.

People of all ages are now comfortable with using the internet for all manner of uses, and the concept of the cloud – being able to locate and log in to programmes and websites from anywhere in the world, is not only understood by most people, but practiced daily. You might be reading this on your iPhone, or on your desktop PC for example. The same principles apply with your accounts software package.

The traditional problems with CD ROM (disk) based accounts software packages is ensuring that we have the same version as you are using, and in addition, the same updates to that version. If not, then it makes changing data/reviewing your records more difficult. Whilst this is not a major issue, it can cause delay, which is not ideal if you require a quick answer to a question.

Using the cloud and the new wave of accounts and bookkeeping software such as Clearbooks, Xero, QuickBooks online and others, means that with login details and user rights, we can log onto your data, whilst you are on the phone, and see exactly what entries you are referring to. This gives you immediate piece of mind, saves time when we prepare your accounts, and ensures your other returns are more accurate (i.e. VAT returns you are submitting from the programme).

Furthermore, when it comes to your year end, you need only to send in the physical documents that we require, such as bank statements, and we do not need to worry about you sending in a backup on a USB stick and making sure we can load it onto a computer in our office. We can also see data that you have entered in the current period, which often answers some of the questions we otherwise may have when preparing your accounts.

Another time saving feature is the option to import your bank transactions straight from your online banking to the software being used.  You can even have a direct bank feed set up to automatically import the data.  All you then need to do is match the bank entries to the appropriate invoice.

You never need to worry about a backup again, as all data is saved “in the cloud”. Security is very tight also, and is comparable to the levels used by the banks for their online banking.

Prices vary depending on which programme you use, but are comparable with the cost of updating your software annually for the latest version on CD Rom, as many are used to. The cost is invoiced monthly, which  is also easier for cashflow. Furthermore, as a certified training partner for Clearbooks, we are able to offer discounts to the stated prices – again please contact us for details.

It is worth noting that the online cloud programmes offer free trials, so should you wish to give it a try, let us know and we can input some opening balances and run through the programme with you. Or alternatively, you can have a go yourself on the demo data that all of the online programmes have.

We have two certified training partners of Clearbooks in the Sidmouth office, being Duncan Akers and Adrian Coombe, and they can assist you in Sage One, Xero and QuickBooks online also.

For more information contact us directly, or peruse the cloud accounting software mentioned on the following sites:

http://www.clearbooks.co.uk/
http://uk.sageone.com/

http://www.xero.com/

http://quickbooksonline.intuit.com/