Question asked by Mustapha Awudu 7 years ago
Hello, how can i apply the withholding tax ? it has to be deducted from the gross amount and then the withheld part goes to Tax expense whiles the actual net hits the bank account. do i have to use journals?
Hi Mustapha
I've never used it but, the main issue here is that the WHT account you have created is in the P&L account and so would indicate that the tax withheld is lost to you, whereas most tax withheld can be offset against your corporation tax liability or refunded to you.
In such a case, when first recorded, the tax is debited to a current asset account, indicating that the tax is due back to you and then when it's offset against the CT liability you can do a journal debiting the CT liability account and crediting the WHT account. The alternative is to stipulate the CT liability account in the last box above in Tommy's screenshot.
It's not clear from Tommy's posts but, you need to set up a revenue account to record all the sales with WHT. In other words, if a sale will be subject to WHT you put it to the new Revenue account and, when the invoice is created, X% of the sale get's debited to the new WHT account or the CT liability account., whatever you stipulated in the last box above.
If you don't want to record any WHT when the invoice is created, because you won't know whether tax is withheld until the cash arrives, then you are probably best not to use CB's WHT feature. Rather, set up a dummy bank account called WHT and create a money in entry to it for the tax and allocate that to part pay the invoice. This will leave you with a balance on the dummy bank account representing what you are owed by HMRC. So, when you come to pay off your CT liability, you could use this balance to part pay it.
Tommy - I can't see a guide to any of this?
Best answerHi Mustapha,
You must toggle on our Withholding Tax feature by heading to Settings > Configure System > Toggle Features > Accounting > Tick Withholding Tax. Once this is done, you can then create a Withholding Tax account code with the relevant percentage; please ensure that the Show in Sales box is ticked and saved.
After this, you can then create the invoice for gross amount coded to the Withholding Tax account. The system would then calculate the Withholding Tax amount based on the rate you've entered when creating the account code. Lastly, when you receive the tax back, you should create an invoice for this amount and code it to Withholding tax account.
I hope this helps!
Tommy
There is already a withholding Tax account code .
where the need to create it again?
secondly , i want the withholding tax option to appear when i am closing the sale after payment has been received.
this is primarily because, not all sales are withheld.
Hi Mustapha,
Please see the instructions above, you will have to toggle the Withholding Tax feature first:
Then, you can create a Withholding Tax account where you can select the rate and account:
Tommy
Hi Mustapha
I've never used it but, the main issue here is that the WHT account you have created is in the P&L account and so would indicate that the tax withheld is lost to you, whereas most tax withheld can be offset against your corporation tax liability or refunded to you.
In such a case, when first recorded, the tax is debited to a current asset account, indicating that the tax is due back to you and then when it's offset against the CT liability you can do a journal debiting the CT liability account and crediting the WHT account. The alternative is to stipulate the CT liability account in the last box above in Tommy's screenshot.
It's not clear from Tommy's posts but, you need to set up a revenue account to record all the sales with WHT. In other words, if a sale will be subject to WHT you put it to the new Revenue account and, when the invoice is created, X% of the sale get's debited to the new WHT account or the CT liability account., whatever you stipulated in the last box above.
If you don't want to record any WHT when the invoice is created, because you won't know whether tax is withheld until the cash arrives, then you are probably best not to use CB's WHT feature. Rather, set up a dummy bank account called WHT and create a money in entry to it for the tax and allocate that to part pay the invoice. This will leave you with a balance on the dummy bank account representing what you are owed by HMRC. So, when you come to pay off your CT liability, you could use this balance to part pay it.
Tommy - I can't see a guide to any of this?
Best answerHi Paul,
Thanks for the clarification, unfortunately, we are not permitted to advise on the account type to use as I am not a qualified accountant, but do appreciate you clarifying this.
We will consider creating a support guide for this.
Thanks,
Tommy
You must 