How do I receive a part payment on a CIS invoice but apply the whole CIS amount 20% - company keeps 5% retention but logs 20% of the whole invoice with hmrc?

You'll have to turn on the CIS feature in your QuickBooks Online (QBO) account, @castlecarpenters. This way, the system will automatically calculate your deductions, track your CIS withheld amounts, and create the needed reports for HMRC.

QuickBooks will create the accounts needed to track CIS once the feature is turned on. Then you’ll see the CIS centre under Taxes. To activate the feature, here's how:

1. Go to the Gear icon. 
2. Select Account and Settings.
3. Click the Advanced menu.
4. Select Construction Industry Scheme (CIS).
5. Enter your UTR no., Employer’s PAYE reference no., Accounts Office reference no., click the I am a CIS subcontractor box, then select your CIS rate.
6. Click Save.

Once done, you need to set up your customer's profile as a CIS contractor. This way, QuickBooks will evaluate your payment part on a CIS invoice.

1. Go to the Sales menu.
2. Select Customers.
3. Choose the New customer button.
4. Enter all the necessary information.
5. Click the Is CIS contractor checkbox.
6. Enter the customer's UTR number in the Tax info tab.
7. Click Save.

Once done, you can select the customer's name so you can edit their profile. Then, click the New transaction button to enter a new invoice/sales receipt.

To learn more about how CIS works in QBO, kindly visit this article for the complete details: CIS in QuickBooks. It contains information on what happens when the feature is turned on, how to receive payments from contractors, and creating transactions using bank feeds to name a few.

I've also added an article from the HMRC about who counts as a contractor or subcontractor, work covered by CIS, and its exemptions: Construction Industry Scheme (CIS).

Please let me know if you have other concerns. I'm just around to help.

Hi @castlecarpenters 

There are a few threads regarding Retentions on here but all involve, essentially, discounting the invoice

https://quickbooks.intuit.com/learn-support/en-uk/transactions/can-you-take-retention-off-a-invoice/01/437232

https://quickbooks.intuit.com/learn-support/en-uk/transactions/how-do-i-add-retention-to-an-invoice-this-retention-is-in/01/238359

but I don't think any make the link with CIS deduction.

It's awkward because CIS is cash-based (reports at payment date) rather than accrual (reports at invoice date).  Although QBO shows it on the invoice, I don't think it accounts for the CIS Suffered until payment date.

You might have to look further into it.  I can't remember how retentions are treated in CIS.

It may not be strictly correct to claim the full 20% CIS Suffered when receiving only 95% of the payment.

The easiest way (possibly not the correct way) may be to raise a 5% credit against the invoice (to a non-CIS product/service) followed by a new invoice for the 5% retention (to the same non-CIS product/service).

(I'd avoid amending the invoice retrospectively as this can cause more problems than it solves).

Hope this gives you a few pointers.