Standard guidance on retentions
- Standard guidance is to deduct amounts of retention from your invoices for both CIS and VAT purposes.
- CIS is deductible when retention monies are paid.
- If, during the retention period, you have moved from CIS deduction status to CIS gross payment status no CIS will be deductible from the old retentions after CIS gross payment status comes into effect.
- VAT is chargeable when retention monies are the earlier of:
- invoiced or
- paid.
- On or Not-on VAT cash accounting
- VAT cash accounting is available when your total turnover is expected to be less than 1.35m in the coming year.
- If you are on VAT cash accounting
- If you include the retention amount in your invoice and charge VAT on the full amount it will not change the VAT that you pay.
- You will pay VAT:
- When you receive the main amount; and subsequently
- when you receive the retention amount.
- If your customer is not on VAT cash accounting
- Your customer can recover VAT charged on retentions when you invoice them.
- Using this invoice
- If you wish to deduct retentions from your figures you need to take off the retention amount before entering the figures in the boxes above.
