Need to allocate journal entry against a specific customer

PB1001PB1001 Member Posts: 4

Hi
I need to do the following (based on instructions from ACCA regarding tax and NI taken at source from contract as I am deemed to be an employee)
The problem arises because the paid amount does not match the invoice and therefore I need to add journal entries to account for this.

I am having an issue with last part I can add the debit for the directors remuneration.
I can pick the directors loan account as a credit but

I cannot pick a specific debtor to add the credit to, i can only pick accounts receivable. As a result the system still thinks the debtor owes money

Any way I can get the books to balance?

Any help much appreciated

Comments

  • ConnorMConnorM Member, Administrator Posts: 193 admin

    Hey @PB1001, can you let me know why the invoice does not match the amount paid? If you've received all funds that you expect from the customer, then you can write off the rest of the invoice by following this Help Center article here. You'd create a line item that discounts the invoice by the amount remaining, and then change the income category to a bad debt account that you'd create in your Chart of Accounts.

  • PB1001PB1001 Member Posts: 4

    Thanks for the response
    The reason is that due to HMRC rules if you are deemed to be an employee, Tax and NI are taken off at source by the client. So you provide an invoice, for say £5000, the client deducts the tax and NI, say £1000 and send me the difference of £4,000. Following this I then do not have to pay any further tax, NI or CT on this £4000 as it has been paid.

    I have resolved by following as suggested in the link you gave (I had previously found the same helpful link). I did not use bad debt but instead created an expense account that accounted for the money not paid I just called it Payroll -IR35 as this is what the regime for taxing as if an employee is called.

    That did the trick.

  • BarsinABarsinA Administrator Posts: 511 admin

    Hey @PB1001

    Thanks so much for the update on your workaround for this! Always good to get more context and see what our business owners are able to do even through the limitations in our system.

  • MerlinAccounts_UKMerlinAccounts_UK Member Posts: 177 ✭✭✭

    @PB1001

    Under IR35 it isn't for your customer to stop tax & NIC's at source - it is for you to compute the deemed salary, in accordance with IR35, and account for tax and NI via payroll accordingly.

    If your "customer" has decided you are an employee of theirs then IR35 doesn't really apply to you per se in this context as what you are receiving is simply remuneration from an employer.

  • PB1001PB1001 Member Posts: 4

    Thanks for the reply always appreciated.

    In local government the "fee payer" i,e, the Council determines the status of the worker and if under IR35 deducts NI and tax .

    "If off-payroll working rules apply, the fee-payer is responsible for deducting tax and National Insurance from payments you make to the intermediary."

    https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-reform-of-intermediaries-legislation.

    my own ltd co is the intermediary by the way

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