VAT - Domestic Reverse Charge VAT
Domestic Reverse Charge
Domestic reverse charge is essentially an anti-fraud measure and applies to a range of goods and services transacted between UK VAT registered suppliers and customers and includes:-
- Mobile Phones
- Computer Chips
- Wholesale Gas, Electricity and Telecommunications
- Emission allowances and renewable energy certificates
- Building and construction services, both buying and selling (from 1 March 2021)
This is a potentially complex area, particularly with respect to the construction industry, and so we strongly advise you consult with your advisor.
For a supplier creating a domestic reverse charge VAT sales invoice to a UK VAT Registered End User
Add a sales invoice in the normal way, but select a VAT rate, as appropriate, either
- 20% Domestic Reverse Charge
- 5% Domestic Reverse Charge
The system impact is to prepare an sales invoice that shows that reverse charge VAT has been applied but that VAT is not charged into the invoice total value. the following notification to the customer is displayed 'Reverse Charge: s55A, VATA 1994 applies' to inform them that the supply must be accounted for as domestic reverse charge VAT. The impact on VAT is zero; however it does affect the VAT100 return by showing the net sales value in box 6.
For customer receiving a bill subject to domestic reverse charge
Enter the bill or payment in the normal way select an appropriate Domestic Reverse Charge VAT rate that would normally apply as notified on the bill. The appropriate entries are made to the VAT100 report and any VAT transaction reports.
The system impact is to add to the VAT control account an amount of output tax (as if a sale) calculated on the full value of the supply received, at the same time add (subject to the normal rules for deduction of input tax) the same amount of VAT as input tax to the VAT control account. The net impact on VAT is zero; additionally the VAT100 return also displays sales values in the appropriate box.
Note that the system distinguishes between domestic and non domestic reverse charge by the country stored on the supplier record.
We repeat It is strongly recommended you take advice from HMRC or your advisor to ensure that this is the correct VAT accounting required.