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Post Info TOPIC: What do people think about Domestic* Reverse Charge
johnhemming


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What do people think about Domestic* Reverse Charge
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With all the issues relating to MTD, DRC may not have got a lot of attention.  However, AIUI it is coming in for contractors on CIS starting from 1st October 2019.

The VAT treatment is a bit fiddly and in some ways similar to EC vat.  In particular when a sub-contractor is paid where the scheme applies the contractor does not pay them their vat and accounts for it on the vat return both in Box 1 and Box 4 (on the assumption that it is an allowable input).  This, however, is not tracked in box 6.

The sub-contractor does not enter the vat at all and puts the net in box 6.

This, of course, is slightly harder in the world of MTD as the software needs to be modified to do all of this.  (Design, test, implement etc).

 

*Domestic - called this because it is in the UK not because it relates only to homes.

HMRC:

https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services#completing-your-vat-return



-- Edited by johnhemming on Sunday 30th of June 2019 09:45:58 AM



-- Edited by johnhemming on Sunday 30th of June 2019 09:48:26 AM

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Cheshire


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Hi John
Ive not read it all properly yet (bombed with work and I actually have no CIS clients - dumped them all and no intention to take any more on!). At a quick glance, they want only box 6 impacted (so initial thoughts whilst not having read it), so zero rated in some software will pick up. Sage has reverse charge vat codes, might work if one is re-coded. Would need to test it. (again after 7th when life returns to more normal levels of work). Not sure about other software. Reckon there will be a lot that is not capable.

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 Joanne 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position
johnhemming


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Sales are box 6 only (to be honest they are much the same as zero rated anyway).

Purchases, however, are boxes 1 and 4 and boxes 6 and 7 (net), but not in the EC boxes.

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Leger


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johnhemming wrote:

The sub-contractor does not enter the vat at all and puts the net in box 6.

This, of course, is slightly harder in the world of MTD as the software needs to be modified to do all of this.  (Design, test, implement etc).

 So basically, for my subby with an invoice of £1500 + VAT I would enter it as £1500 no VAT and that's job done, or is there more to it than that?



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