(GBR) Processing CIS Vouchers

This chapter provides an overview of the construction industry scheme (CIS) and discusses how to:

• Enter CIS vouchers.

• Process CIS vouchers for payment.

• Complete the CIS23 and CIS25 payment vouchers.

• Maintain CIS voucher history.

• Work with the CIS tag table.

Understanding the CIS

The economic environment in Great Britain construction industry is diverse and complex. A business owner or main contractor can employ many subcontractors to complete a contract. To meet statutory requirements, especially in the area of taxation, contractors must maintain careful records of the subcontractors whom they employ and the withholding tax that the contractor is required to pay.

Withholding tax for subcontractors in the construction industry is administered under the Construction Industry Scheme (CIS). Under CIS, subcontractors must be registered with the Inland Revenue Service and hold a valid tax certificate or card.

Subcontractors who hold registration cards are subject to a withholding tax deduction from qualifying payments. The withholding tax is deducted before value-added tax (VAT) is calculated. For these payments, the contractor must produce a tax payment voucher to accompany the tax remittance.

Payments to subcontractors who hold certificates can be made without deduction. Depending on the type of certificate that is held by the subcontractor, the contractor must either produce a construction gross payment voucher or receive a gross payment voucher from the subcontractor.

At the end of each tax month, any withholding tax that was deducted under the rules of the scheme, as well as the payment vouchers (that is, those that were created by the contractor and those that were received from the subcontractor), must be remitted to the Inland Revenue Service. At the end of the tax year, all payments must be reported to the Inland Revenue Service.

Consult the Inland Revenue Service for information about current rules and regulations, including current withholding tax rates.

CIS Rules

The CIS covers payments that are made to these types of subcontractors who work in the construction industry:

• CIS4 Registration Card holders, usually individuals.

• CIS5 Certificate holders, usually large multinational corporations.

• CIS6 Certificate holders, usually teams of subcontractors who work with other subcontractors.

No payments are allowed to subcontractors who do not hold one of these cards or certificates.

Any payments that are made to holders of valid CIS4 Registration Cards are subject to a withholding tax deduction on labor costs and on certain categories of expenses, such as those incurred during the provision of labor. All payments to CIS5 and CIS6 Certificate holders can be made without deduction if the subcontractor's certificate is valid at the time of payment.

The CIS imposes these obligations at the time of payment:

• CIS4 Registration Card holders.

  The contractor must send an accompanying CIS25 Tax Payment Voucher to the subcontractor at the time of payment.

• CIS5 Certificate holders.

  The contractor must create a CIS23 Construction Gross Payment Voucher, but does not need to send this document to the subcontractor with the payment.

• CIS6 Certificate holders.

  The subcontractor must complete a CIS24 Gross Payment Voucher and return that document to the contractor who is making the payment. The contractor might not make any subsequent payments until the CIS24 is received.

At the end of each tax month, the contractor must remit any withholding tax that the contractor has deducted to the Inland Revenue Service along with any CIS23, CIS24, and CIS25 documents that the contractor created or received during the tax month.

At the end of the tax year, the contractor must submit CIS36 End of Year Returns for all payments that are made within the scheme to the Inland Revenue Service.

Entering CIS Vouchers

This section provides an overview of entering CIS vouchers and discusses how to enter vouchers for subcontractors.

Understanding Voucher Entry for the CIS

When you enter CIS subcontractor vouchers through the Standard Voucher Enter (P0411), the Speed Voucher Entry program (P0411SV), or through the Match Voucher - Application Certificate Management (P0411), version ZJDE7002) program, the system creates a record in the F0411 CIS Tag Table (F74U0116) and assigns the CIS Default Status that is defined in CIS Constants to the record. As the record progresses through the CIS payment process, the system updates the CIS status of the record in the F74U0116 table.

The following table describes typical status codes:

Note. Running the CIS Pre Withholding Validation (R74U0130) program changes the value in the Pay Status field (data item PST) of records that require withholdings to be applied from H (Held) to % (Withholding Applies), and the pay status of records that do not require withholdings to be applied from H (Held) to A (Approved for Payment).

Note also that because the CIS system does not support alternate currency payments and because CIS reports must display amounts in British pounds (GBP), the system supports only CIS transactions with a domestic currency of GBP.

Entering Vouchers for Subcontractors

When you receive a subcontractor's application for payment, you must create a voucher before you can issue payment. The payment amount and the pay item information that you enter are typically based on the application and certification process.

Contractors are required to withhold certain amounts from a subcontractor's payment, depending on the type of tax regulations that apply to the subcontractor. To determine the total amount of the payment that is eligible for withholding, the contractor must distinguish between the taxable and nontaxable portions of each voucher.

You can enter vouchers for subcontractors using any of these programs:

• Standard Voucher Entry (P0411).

• Speed Voucher Entry (P0411SV).

• Match Voucher - Application Certificate Management (P0411, version ZJDE7002).

If you use the Standard Voucher Entry or the Speed Voucher Entry program, you indicate whether each line is a taxable supply within the scope of the scheme. If you use the Match Voucher - Application Certificate Management program, the system identifies taxable supplies automatically, based on the Object Account category code that is specified in CIS Constants.

The system marks all voucher pay items with a status that is specified in the CIS Constants, usually H (Held). When you run the Construction Industry Payment Validation (R74U0130) program, the system marks pay items that you specified as eligible for withholding tax with a pay status of %. Only vouchers with a pay status of % are processed by Calculate Withholding - Great Britain (R74U04580).

Working with Logged CIS Vouchers

If you do not know to which GL account to distribute a voucher, you can enter a logged (preliminary) voucher. This action is useful to quickly enter a voucher when you receive the supplier's invoice so that you can maintain accurate accounts payable information.

When you enter a logged voucher, the system distributes the total amount of the voucher to a GL suspense account. Later, you review and redistribute the voucher to the correct GL accounts.

To view those vouchers that are assigned to a suspense account, print a report from the Voucher Detail Report program (P04428). These reports show transaction totals from the F0411 table.

When you enter a logged voucher, the system:

• Creates a voucher with a voucher number and document type of PL.

• Distributes the total amount of the voucher to a GL suspense account.

  The default value for this suspense account is specified in AAI item PP.

• Records the offset amount, based on the AP trade account (AAI item PC) or the AP trade suspense account (AAI item PQ), depending on which method is designated on in the Company Numbers and Names program.

Information about logged vouchers is maintained in the F0411 and F0911 tables.

You run the CIS Pre Withholding Validation (R74U0130) program for logged vouchers after you have distributed the vouchers to the correct GL accounts.

Setting Up Logged CIS Vouchers

Logged vouchers are processed through the CIS system like other vouchers except that they must be redistributed to the correct GL accounts before they are validated for withholding.

Omitting Undistributed Vouchers from Withholding Validation

To ensure that logged vouchers that have not been distributed are not selected by the CIS Pre Withholding Validation (R74U0130) program, you must set the data selection on CIS Pre Withholding to exclude vouchers with an A/R - A/P - Cash Rcpts/Inv Reg Code of P.

Setting Up Distributed Vouchers for Withholding Validation

Running the CIS Pre Withholding Validation program (R74U0130) changes the value in the Pay Status field (data item PST) of records that require withholdings to be applied from H (Held) to % (Withholding Applies), and the pay status of records that do not require withholdings to be applied from H (Held) to A (Approved for Payment). Therefore, vouchers must have a pay status of H before they can be processed by the CIS Pre Withholding Validation program. You can ensure that logged vouchers have a pay status of H by setting the following processing options:

• On Voucher Match (P4314), set the Pay Status Code processing option on the Logs tab to H.

  On the Voucher Match tab of the processing options for Match Voucher to Open Receipt (P0411), specify the version of Voucher Match on which you set the Pay Status Code processing option.

• For the A/P Voucher Journal Entry Redistribution program (P042002), set the pay status processing option (processing option 2 on the Defaults tab) to H.

See Also

Selecting Receipt Records to Match to a Voucher

Prerequisites

Before you complete the tasks in this section:

• Verify that the Localization Country Code field in the User Profile Revision program is set to UK (Great Britain).

• Set up supplier master records for your subcontractors.

  You must use a category code to identify subcontractors.

• Activate the Use Suspense Account option in the Company Names and Numbers program (optional).

• Set up AAI item PP and, if you use the trade suspense account, item PQ.

• Assign an approver number to each supplier (optional).

• Run Update Approver/Category Code 7 (optional).

Form Used to Enter Vouchers for Subcontractors

Entering Vouchers for Subcontractors

Access the Withholdings Confirmation form.

Processing CIS Vouchers for Payment

This section provides an overview of the processing CIS vouchers for payment and discusses how to:

• Run the CIS Pre Withholding Validation program.

• Set processing options for CIS Pre Withholding Validation (R74U0130).

• Run the CIS Calculate Withholding program.

• Set data selection for CIS Calculate Withholding.

• Set processing options for CIS Calculate Withholding (R74U04580).

Understanding Payment of CIS Vouchers

To process withholding amounts for subcontractors, you must first determine whether withholding tax applies to your subcontractor's vouchers, and then create the journal entries for the amount that is to be withheld from the total payment to the subcontractor.

The system determines whether withholding tax is applicable, based on the country-specific rules that are associated with a subcontractor's tax certificate. After vouchers are evaluated for withholding tax eligibility, the system calculates the actual withholding tax amounts for each voucher.

The purpose of CIS is to calculate any withholding tax liability at the point of payment, not at the point of voucher entry. Therefore, you must run the CIS Pre Withholding Validation program (R74U0130) and the CIS Calculate Withholding program (R74U04580) as part of the prepayment cycle.

When you have processed the withholding amounts for your subcontractor, you can run the create payment groups process to process payments as usual.

Running the CIS Pre Withholding Validation

Before you make any payments to CIS subcontractors, you must run the CIS Pre Withholding Validation program (R74U0130) to evaluate each voucher. The program selects and validates any open AP vouchers that are due for payment, based on the pay-through date that is specified in the processing options and that have a CIS status of blank in the F74U0116 table. The program then determines whether a valid card or certificate exists for the subcontractor as of the current date.

The program produces a report of all processed vouchers, sequenced by subcontractor, that includes:

• Warning messages that are associated with the validation of a subcontractor's card or certificate.

• Information about tax that is being withheld.

You can use the processing options for the CIS Pre Withholding Validation program to:

• Process transactions in proof or final mode.

• Enter a pay-through date that the system uses to select vouchers that are due for payment.

• Specify whether to make payments to or withhold tax from a subcontractor whose card or certificate meets any of several invalidation conditions.

Running the CIS Pre Withholding Validation program in proof mode produces a report only. Running the program in final mode produces a report and updates the pay status for individual pay items in the F0411 table:

• Pay items that can be paid and that should have no tax withheld are assigned a pay status of A.

• Pay items that can be paid and that should have tax withheld are assigned a pay status of %.

Running the CIS Pre Withholding Validation program in final mode also updates the CIS status of vouchers in the F74U0116 table to C (Validation Complete).

Calculating Withholding

You must withhold applicable tax amounts when you make a payment to a subcontractor.

You must withhold applicable tax amounts from payments to subcontractors and remit that amount to the Inland Revenue Service. After you validate vouchers for withholding tax eligibility, you use the CIS Calculate Withholding program (R74U04580) to calculate applicable withholding tax amounts. This program:

• Selects any open AP vouchers that have a pay status of %.

• Calculates the amount of tax to withhold, based on the withholding tax percentage from the subcontractor's record in the F0401 table.

• Calculates withholdings on a net basis (before VAT) or on the gross amount, based on the processing options.

• Updates the pay status of the original voucher pay item in the F0411 table from % to the value that you specify in the processing options.

• Creates a negative pay item for the withholding amount with the same payee, pay status, and due date as the original voucher pay item.

• Creates a positive pay item for the withholding amount with the tax authority that is associated with the subcontractor in the F0401 table as the alternate payee, with the same due date as the original voucher pay item.

The net effect of the two pay items is zero, but the subcontractor's payment is reduced by the negative pay item.

The CIS Calculate Withholding program produces a report that lists the new pay items and the pay status of each item. If applicable, the program also produces an error report that lists the vouchers that were not released for payment, and the error that is associated with each voucher or pay item.

Note. The abbreviation "PS" on the Calculate Withholding Status Report stands for pay status.

Options for Paying Withholding Tax to the Revenue Authorities

You can pay withholding tax that you have deducted from subcontractors' payments using either of the following methods:

• Accounts Payable

• General Accounting

Processing withholding tax payments through the JD Edwards EnterpriseOne Accounts Payable system normally means that you pay your withholding tax as a separate payment to the Inland Revenue Service. The withholding tax payment is not included with your monthly PAYE (Pay As You Earn) payment.

To process withholding tax payments through the JD Edwards EnterpriseOne Accounts Payable system:

1. Accumulate withholdings (tax deductions) for your subcontractors under the tax authority payee (Inland Revenue Service) with a pay status of H (hold).

2. Release your pay items using the Speed Release program (P0411S) when you are ready to make a payment run.

3. Run the Create Payment Control Groups (R04570) program with the Payee processing option on the Process By tab set to 1 to create payment groups by payee.

4. Write and update a payment using a UK cheque (P04572U1 or P04572U2), a BACS payment (P04572B), or another payment print program to create your payment to the Inland Revenue Service.

5. Send this payment to the Inland Revenue Service.

Processing withholding tax payments through the JD Edwards EnterpriseOne General Accounting system enables you to include your withholding tax in your monthly PAYE payment to the Inland Revenue Service. This method is a common practice in Great Britain.

To process withholding tax payments through the JD Edwards EnterpriseOne General Accounting system:

1. Accumulate withholdings (tax deductions) for your subcontractors under the tax authority payee (Inland Revenue Service) with a pay status of H (hold) and an alternate bank account, such as a withholding tax account.

2. Release your pay items using the Speed Release program (P0411S) and change your bank account to a withholding tax account when you are ready to make a payment run, if you have not already done so.

3. Run the Create Payment Control Groups program (R04570) and select your withholding tax account as the bank account and the Inland Revenue Service as a special payee.

4. Use the Work With Payment Groups program (P04571) to write and update the withholdings payment, but do not print or send the AP payment.

5. Process your normal Inland Revenue Service payment through the general ledger by creating a journal entry to debit your tax withholdings account and your PAYE account and crediting your normal bank account with the sum of all payments to the Inland Revenue Service.

6. Create a physical payment to the Inland Revenue Service outside of the system, such as by writing a cheque manually.

7. Send this payment to the Inland Revenue Service.

Prerequisites

Before you complete the tasks in this section:

• Identify the tax withholding rate and the tax authority for each subcontractor.

  See Entering Supplier Master Information.

• Set up a GL account for withholding tax, if required.

• Set up a nonblank GL offset in AAI item PCyyyy for withheld credits.

Running CIS Pre Withholding Validation

Select Automatic Payment Processing (G74U0213), CIS Pre Withholding Validation.

Setting Processing Options for CIS Pre Withholding Validation (R74U0130)

Processing options enable you to specify the default processing for programs and reports.

Date

Process

Defaults

Running CIS Calculate Withholding

Select Automatic Payment Processing (G74U0213), CIS Calculate Withholding.

Setting Data Selection for CIS Calculate Withholding

You can modify the data sequence of your version of the CIS Calculate Withholding program so that the output more closely matches your reporting needs. For example, you might want to list document numbers before document types.

Setting Processing Options for CIS Calculate Withholding (R74U04580)

Processing options enable you to specify the default processing for programs and reports.

Pay Status

G/L Offset

Tax Authority

Process

Completing the CIS23 and CIS25 Payment Vouchers

This section provides an overview of completing the CIS23 and CIS25 payment vouchers and discusses how to:

• Run the Gross Payment Voucher CIS23 report.

• Set processing options for Gross Payment Voucher CIS23 (R74U0136).

• Run the Tax Payment Voucher CIS25 report.

• Set processing options for Tax Payment Voucher CIS25 (R74U0135).

Understanding Completion of the CIS23 and CIS25 Payment Vouchers

The following reports provide the information that is necessary to complete your construction gross payment vouchers and your tax payment vouchers, both of which you must submit to the Inland Revenue Service on a monthly basis:

• The Gross Payment Voucher CIS23 report (R74U0136).

• The Tax Payment Voucher CIS25 report (R74U0135).

Gross Payment Voucher CIS23 Report

Print the Gross Payment Voucher CIS23 report (R74U0136) to list gross payment details that relate to subcontractors who hold construction tax certificates (CIS5). This listing provides the information that is necessary to complete your construction gross payment vouchers.

The listing covers the tax month from the 6th of one month to the 5th of the next month. You should complete your construction gross payment vouchers from the report, send copies of the payment vouchers to the Inland Revenue Service, and keep a copy.

The processing options for the Gross Payment Voucher CIS23 report control the selection date, the gross payment voucher type, company number, and the processing mode (proof or final). Running the report in proof mode produces the report only. Running the report in final mode produces the report and updates the CIS status of selected vouchers.

Tax Payment Voucher CIS25 Report

Print the Tax Payment Voucher CIS25 report (R74U0135) to list tax payment details that relate to subcontractors who hold registration cards (CIS4). This listing provides the information that is necessary to complete your tax payment vouchers.

The listing covers the tax month from the 6th day of one month to the 5th day of the next month. You should complete your tax payment vouchers from the report, send copies of the payment vouchers to the Inland Revenue Service and to the subcontractors, and keep a copy.

The processing options for the Tax Payment Voucher CIS25 report control the selection date, the gross payment voucher type, company number, and the processing mode (proof or final). Running the report in proof mode produces the report only. Running the report in final mode produces the report and updates the CIS status of selected vouchers.

When you run the report in final mode, the voucher sequence number from the CIS Tax Payment Voucher Constants (P74U0102) is included on the report.

Running the Gross Payment Voucher CIS23 Report

Select Accounts Payable Reports (G74U0214), Gross Payment Voucher CIS23.

Setting Processing Options for Gross Payment Voucher CIS23 (R74U0136) and Tax Payment Voucher CIS25 (R74U0135)

Processing options enable you to specify the default processing for programs and reports.

Date

Process

Running the Tax Payment Voucher CIS25 Report

Select Accounts Payable Reports (G74U0214), Tax Payment Voucher CIS25.

Maintaining CIS Voucher History

This section provides an overview of maintaining voucher history and discusses how to:

• Review CIS voucher history.

• Review payments to subcontractors.

• Enter CIS voucher details.

Understanding CIS Voucher History Maintenance

You can view the CIS purchase voucher history, including all of the status changes that each purchase voucher has passed through in the CIS system. You can also review payments that are made to subcontractors.

When you receive a CIS24 gross payment voucher from a subcontractor, you enter information from the CIS24 voucher. You should not make additional payments to a CIS6 certificate holder until you have received a CIS24 voucher for the previous payment.

Reviewing CIS Voucher History

Use the CIS History Revision program (P74U0118) to view the CIS purchase voucher history that is held in the Payment Voucher Status History table (F74U0118). This table contains an audit record of all of the status changes that each purchase voucher has passed through in the CIS system.

Reviewing Payments to Subcontractors

You use the CIS Tax Payment Vouchers program (P74U0119) to review payments made to subcontractors.

You can view all payments, only those payments that require the return of a CIS24 voucher, or only those payments that do not require a CIS24 voucher.

Entering CIS24 Voucher Details

CIS6 certificate holders are required to complete and return a CIS24 gross payment voucher upon receipt of payment. A contractor should not make additional payments to a CIS6 certificate holder until a CIS24 voucher for the previous payment has been received.

When you receive a CIS24 gross payment voucher from a subcontractor, you use the CIS Tax Payment Voucher program (P74U0119) to enter information from the CIS24 voucher.

Important! The CIS system does not handle partial payments to subcontractors. If any subcontractor vouchers have been partially paid, they should be voided and reentered with the payment amount. Similarly, if any partial payments are recorded, they should be voided and reapplied to a voucher that corresponds to the total payment amount.

Forms Used to Maintain CIS Voucher History

Setting Processing Options for CIS Tax Payment Vouchers (P74U0119)

Processing options enable you to specify the default processing for programs and reports.

Default

Reviewing CIS Voucher History

Access the Work with CIS Voucher Status History form.

Reviewing Payments to Subcontractors

Access the Work With Tax Payment Voucher form.

Entering CIS Voucher Details

Access the Tax Payment Voucher Returned Revisions form.

Working with the CIS Tag Table

This section provides an overview of the CIS tag table and discusses how to:

• Add CIS document information to the F74U0116 tag.

• Correct the CIS tag table.

• Update the CIS status for one voucher.

• Update the CIS status for multiple vouchers.

Understanding the CIS Tag Table

The F74U0116 table contains detailed information about CIS subcontractor vouchers, including information from the subcontractor's registration card or certificate, and whether a pay item should have tax deducted and the CIS voucher status. You should not revise the F74U0116 table for any reason other than correction.

Adding CIS Document Information to the CIS Tag Table

The F74U0116 table includes detailed information about CIS subcontractor vouchers, including information from the subcontractor's registration card or certificate. You can enter information from the subcontractor's registration card or certificate directly into the F74U0116 table if that information was not available when you entered the voucher.

Important! Only authorized personnel should have access to change the F74U0116 table. Changes to the F74U0116 table might produce unpredictable results.

Correcting the CIS Tag Table

The F74U0116 table includes detailed information about CIS subcontractor vouchers, including whether a pay item should have tax deducted and the CIS voucher status. The F74U0116 table is populated automatically during various stages of CIS processing. However, you can have cause to correct the F74U0116 table.

The system enables you to record the return of a CIS24 gross payment voucher and change the taxable status of pay items. You should not revise the F74U0116 table for any reason other than correction.

Important! Only authorized personnel should have access to change the F74U0116 table. Changes to the F74U0116 table might produce unpredictable results.

Updating the CIS Status for Multiple Vouchers

You can use the CIS Tag File History Change program (R74U0134) to globally update records in the F74U0116 table with a new CIS voucher status code. Valid CIS status codes are stored in UDC 74U/VS.

You should use this program to correct errors or discrepancies in CIS vouchers.

This program produces a report that provides detailed information about all selected vouchers. You can run this process in proof to generate the report only, or in final mode to generate the report and update the tag file.

Forms Used to Work with the CIS Tag Table

Adding CIS Document Information to the CIS Tag Table

Access the F0411 Tag File Revisions form.

Correcting the CIS Tag Table

Access the F0411 Tag File Detail Revisions form.

Updating the CIS Status for One Voucher

Access the CIS Voucher Status History Revisions form.

Running the CIS Tag File History Change Report

Select Advanced & Technical Operations (G74U0230), CIS Tag File History Change.

Setting Processing Options for F0411 - CIS Tag File Status History Change (R74U0134)

Processing options enable you to specify the default processing for programs and reports.

CIS Status

Process