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bigduckontax, Accountant
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Construction Industry. Do we charge gross materials (including

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Construction Industry. Do we charge gross materials (including the VAT) and Labour less the relevant tax and then charge VAT on final total ?
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. I will set out the traditional accounting procedures to show you how it all works. When you buy materials then the book keeping entries are Debit Cost of Sales, Debit VAT Credit Bank/Cash. The cost of sales figure represents the charge to be passed on to the customer and the VAT is an input which you reclaim quarterly from HMRC on your return. For the labour, presumably under CIS, the entries are Debit Cost of Sales Credit Bank/Cash, Credit Tax Suspense [for the tax with held from contractors/employees]. At intervals you will render the tax deducted to HMRC by Debit Tax Suspense, Credit Bank/Cash thus clearing the Tax Suspense. Your are now left with entries in the Cost of Sales ledger and you take these into account when preparing your invoice for your customer to which you may well add a profit element. To this total you apply VAT. I do hope that I have clarified this matter.
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