Domestic Reverse Charge 2: Sales invoices and VAT returnsby
Neil Warren sets out simple steps to getting invoices, credit notes and VAT returns right, when applying the domestic reverse charge in the construction industry.
A challenge with the new domestic reverse charge rules being introduced into the construction industry on 1 March 2021 is not to over-complicate the accounting issues.
All that is happening is that VAT is not being charged by a supplier on a qualifying job subject to 5% or 20% VAT, and the customer includes the VAT in box 1 of their own return instead.
Plumber Pete is doing work for Contractor Ltd which is subject to the new reverse charge rules. The value of the work is £10,000 plus 20% VAT.
Pete will invoice the company for £10,000 with no VAT, and record the sale as an output in box 6 of his next VAT return. If he uses the cash accounting scheme, the box 6 entry will be based on the payment date rather than invoice date.
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