Note: If you are on cash accounting, do not follow the steps below, please instead refer to Entering a DRC sales invoice (cash accounting)
For an overview, please refer to Sales by subcontractors
To enter a sales invoice subject to domestic reverse charge:
1.If you have already generated a sales invoice elsewhere, use the SIN (not underscored) function (or if you want to use VT Transaction+ to generate a sales invoice, see Raising a DRC sales invoice).
2.Enter the net amount in the Net field, select No VAT in the VAT Output field, and leave the Type of sale (for VAT purposes) setting as Normal.
|Screenshot showing the entry of a sale subject to domestic reverse charge VAT|
3.Although you do not charge VAT, you need to include the net value of the sale in Box 6. of your VAT return. This is done automatically, so long as the analysis account used for the transaction is set to being within the scope of VAT (which income accounts are by default). This setting can be changed by choosing the Set Up>Accounts>All command and then by double clicking on an account and unticking/ticking Entries analysed to this account are normally within the scope of of VAT.
4.If you are on the flat rate scheme for VAT, domestic reverse charge transactions are excluded from the scheme, so the sale would be excluded in calculating turnover subject to flat rate VAT. Therefore, you will not be able to use the workaround described in Flat rate scheme and you should calculate the figures for your flat rate return manually.
If you are entering a sales receipt using the REC function, this can be entered in the same way.
The Income: Fees account is used as an example. You can use a different income account if it is more appropriate.
Applying the CIS deduction
If you need to also apply the CIS deduction, follow the same steps as above with the only differences being:
•an additional line is entered for the CIS deduction
•the value in the Total and Net fields is the VAT exclusive amount less the CIS deduction
For example, a sale for £100 (VAT exclusive amount) of services with a 20% CIS deduction is entered as shown below, using the SIN or REC transaction.
The Debtors: HMRC (CIS) account needs to be created by selecting Set Up>Accounts>New. Do not tick Entries analysed to this account are normally within the scope of VAT.