Handling of CIS and Reverse charge transactions in Receipt Bot
The Construction Industry Scheme (CIS) applies to construction industry businesses in the UK that operate as subcontractors. Under this scheme, a contractor must deduct a certain amount before paying a sub-contractor. These deductions are advance payments against the subcontractor’s income tax and national insurance payments.
Note: Receipt Bot does not support CIS calculations on its own. Instead, it passes the relevant data to your integrated accounting software (Xero or QuickBooks Online) to calculate and record the CIS deductions.
Steps to enable CIS with Receipt Bot
If you would like to get the CIS amount calculated on your purchase invoice, then you can follow these steps.
- Step 1 – Enable the CIS feature in your accounting software.
- Step 2 – Ensure the selected supplier is marked as a contractor in your accounting software
- Step 3 – Ensure a CIS category is selected on your documents in Receipt Bot.
- Step 4 – Click on the export button to create a new transaction in Receipt Bot
Step 1 – Enable CIS in your accounting software
To handle your calculations related to the CIS deductions, you need to switch on the CIS-related settings in your accounting software. You can follow these links to set up the CIS feature in your accounting software.
Setup CIS in QuickBooks Online
Step 2 –Setup suppliers and CIS rates in your accounting software
From your accounting software, ensure that the relevant suppliers/contacts are marked as sub-contractor and that the relevant CIS rates or CIS categories are assigned to them.
You can follow this video to create a new sub-contractor in Xero and specify its CIS rate:
You can follow this video to add a new supplier in QuickBooks Online and mark it as contractor/sub-contractor
Step 3 – Assign CIS category to processed documents in Receipt Bot
Once the documents are processed, you need to ensure that a CIS category is selected for all CIS-related transactions.
Receipt Bot does not select a CIS category by default for new suppliers/contacts, so you must select the category for each document before exporting them. Based on this history, the system will learn to assign the relevant CIS category. You can also specify the default category at the contact level from the Integration Data page, which will be selected on all future documents.
Note: If you select a CIS-related expense category, but the selected supplier is not marked as a contractor in your accounting software, the accounting software will return an error that CIS accounts cannot be used with non-CIS-related suppliers.
Step 4 – Export documents to your accounting software
Click the “Export” button to create a new transaction in your accounting software with the CIS amounts.
Note: Receipt Bot does not calculate or extract the CIS amounts from an invoice; instead, Receipt Bot passes the relevant values to your integrated accounting software for this calculation.
You can verify the calculation for CIS by viewing the transaction in your accounting software.
Limitations of the CIS feature
Limitations in the Xero Export
Xero calculates CIS deduction on the total (gross) amount. If you expect the CIS to be calculated on a different amount, you must manually update the transaction in Xero. You need to split the line amount between amounts applicable for CIS and not applicable.
Limitations in QuickBooks Online Export
QuickBooks Online does not calculate the CIS amount automatically when Receipt Bot creates a transaction. Therefore, you need to open exported transactions in QuickBooks Online and set the CIS amount manually.
Adding CIS amounts to transactions created in QuickBooks Online
Handling of VAT reverse charge rate
Reverse charge VAT is a concept that applies to services purchased or sold outside of the United Kingdom or European Union, explaining how the VAT must be reported in the VAT return for these services.
The calculation for reverse charge VAT is that you add the purchase amount to input or payable tax, and you need to set off the liability by adding the same amount to the output or reclaimable tax. You are not liable to pay additional taxes to the tax authorities.
Receipt Bot can automatically extract if the document mentions the reverse charge VAT. The system will record a transaction in Xero or QuickBooks Online with a reverse charge VAT rate.
Related Articles
You can read about exporting documents to Xero or QuickBooks Online and verifying the exported transactions from the following articles: