Domestic VAT Reverse Charge - UK

Domestic VAT Reverse Charge - UK

What is domestic VAT reverse charge?

From 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.
The charge applies to standard and reduced-rate VAT services:

  • - for individuals or businesses who are registered for VAT in the UK
  • - reported within the Construction Industry Scheme

When the Reverse Charge is applied, the recipient of the goods or services makes the declaration of both their purchase (input VAT) and the supplier’s sale (output VAT) in their VAT return. In this way, the two entries cancel each other from a cash payment perspective in the same return.

How to add records to Cashflow for Reverse VAT Invoices (Money Out)

This is for payments made to Suppliers that attract domestic VAT reverse charge.

As the customer you need to have amounts in BOX 1, 4 and 7 in the VAT Return to the HMRC.

To achieve this, you will need a Money Out record and a Reverse VAT record.

Money Out Record – Box 4 and 7

To get the correct figures in box 4 and 7 on your VAT report you will need to add a ‘Reverse VAT Balancer’ column in the Money out section of Cashflow Manager.

- Open [Customise Columns] and select [Money Out]
- Click [Add New]
- Add a name for the balancer column EG ‘Reverse VAT Balancer’
- Assign the Tax type of ‘Outside’ (Tax type must be ‘Outside’)
Note: Do NOT include this column in Profit/Loss Report
- Click [Save]


Recording reverse VAT records in Money Out.

  1. 1. Enter the date and Supplier name
  2. 2. In Total Payments record the amount due, this will be the (The amount excluding VAT)
  3. 3. Navigate the amount to an allocation column (must have a Tax Type of VAT) and then edit the amount to the total of the Reverse VAT invoice. (The amount including VAT) and press enter on your keyboard
  4. 4. Allocate the negative amount to the ‘Reverse VAT Balancer’ column you setup with a Tax type of ‘Outside’.
  5. 5. Press enter on your keyboard to complete the record
 

Reverse VAT Record – Box 1

Reverse VAT records are a new feature in Cashflow Manager.
To get the correct figures in box 1 on your VAT report you will need to record a Reverse VAT record
  1. 1. Select [Reverse VAT records] from the [Tools] menu.
  2. 2. Click [Add]
  3. 3. Set the date that is in the correct VAT period for this record.
  4. 4. Enter the VAT amount for this record.
  5. 5. Click ‘Save’.
 

How to add records to Cashflow for Reverse VAT Invoices (Money In)

Suppliers

This is for payments from Customers that attract domestic VAT reverse charge. As the supplier you need to have amounts in BOX 6 in the VAT Return to the HMRC

To achieve this, you will need a Money In record and a Reverse VAT record.
 

Money In – Box 6

To get the correct figures in box 6 on your VAT report you will need to add a ‘reverse VAT Balancer’ column in the ‘Money In’ section of Cashflow Manager.
  1. 1. Open [Customise Columns] and select [Money In]
  2. 2. Click ‘Add New’
  3. 3. Add a name for the balancer column EG ‘Reverse VAT Receipts’ and assign the Tax type of ‘Exempt’.
  4. 4. Click [Save]
 
 

Recording reverse VAT records in Money In.

  1. 1. Enter the date and Customer name
  2. 2. In ‘Total Receipts’ record the amount due; this will be the (The amount excluding VAT) and press enter on your keyboard
  3. 3. Navigate the amount to the ‘Reverse VAT Receipts’ (Must have a tax type of ‘Exempt’) column and press enter on your keyboard
  4. 4. Press enter again to complete the record.
Figures for reverse VAT records are included in boxes 1.4.and 7 for Money Out records and box 6 for Money in records when running VAT report.
 

How to record Reverse VAT Invoices in Invoice Manager

Switching on reverse VAT functionality on invoices
  1. 1. Open [Invoice Manager Options]
  2. 2. Select [Advanced Preferences] and tick the option [Use Domestic Reverse VAT Charge]
  3. 3. Click [Save]
 
  • - When this option is ticked Customer and Supplier invoices will show a check box to ‘Apply Domestic Reverse VAT’
  • - If not ticked balance due on the invoice will include VAT.
  • - If ticked balance due on the invoice will exclude VAT.
 

Reverse VAT Customer Invoices.

When generating a Customer invoice that attracts Domestic Reverse VAT,
  1. 1. Add items to your invoice.
  2. 2. Tick box to [Apply Domestic Reverse VAT], this will change Balance Due to exclude VAT.
  3. 3. Click [Save]
  4. 4. Click [Finalise]

When printing Reverse VAT invoices, a note is automatically inserted showing that Reverse Charge applies, and the customer is to pay the VAT to the HMRC.
 

Transferring reverse VAT customer invoices to Cashflow.

  1. 1. Enter Receipt Date
  2. 2. Enter Amount received
  3. 3. Tick [Transfer to Cashflow]
  4. 4. Select the column setup for Reverse VAT receipts (Tax type must be exempt).
  5. 5. Click [Save]\n\n \nReverse VAT Supplier Invoices.
  6. 6. When generating a Customer invoice that attracts Domestic Reverse VAT,
  7. 7. Add items to your invoice.
  8. 8. Tick box to [Apply Domestic Reverse VAT], this will change Balance Due to exclude VAT.
  9. 9. Click [Save]
  10. 10 Click [Lock]
When printing Reverse VAT invoices, a note is automatically inserted showing that Reverse Charge applies, and the customer is to pay the VAT to the HMRC.
 

Transferring reverse VAT supplier invoices to Cashflow

  1. 1. Enter Payment Date
  2. 2. Enter Amount to pay
  3. 3. Tick [Transfer to Cashflow]
  4. 4. Select column for transfer. (Must have a tax type of VAT).
  5. 5. Edit the amount to the total of the Reverse VAT invoice. (The amount including VAT) and press enter on your keyboard\n
  6. 6. Allocate the negative amount to the ‘Reverse VAT Balancer’ column you setup with the Tax type ‘Outside’.\n
  7. 7. Click [Save]\n\n8. After transferring the record to Cashflow, remember to add the Domestic Reverse VAT record through [Tools] in Money Out

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