CIS deduction after retention - subcontractor invoices
When creating subcontractor bills and deducting retention, the CIS includes the retention when calculating the deduction
For example, XERO should read:
£250.00
minus 3% retention (£7.50)
£242.50
minus CIS (£48.50)
= £194.00
HOWEVER, XERO calculates:
£250.00
minus 3% retention (£7.50)
minus CIS (£50.00) (off the gross amount not the amount after retention deducted)
= £200.00
This means that CIS deduction is incorrect.
There is no way around this currently even though similar issues have been raised since 2019 on Xero discussion threads and no solution has been made.
The only way around it offered by Xero means that payment & deduction statements are not as per HMRC guidelines and would not show retention deducted from a subcontractor meaning that contractors could be fined!
Sarah Broughton
shared this idea
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Mykola Andrusyak
commented
my supplier asking me to deduct retention 5% from total amount first and then after that deduct 20% CIS , I cannot do it on XERO I have to do it manually and at the same time i need to show it on invoice so i have record of it to be able to claim it after a while
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Melanie Bone
commented
I came across this thread looking for an answer for my client. They could not work out how to calculate CIS after deduction of retention. I am shocked to discover this is not possible on Xero!