I am trying to input a reverse charge vat invoice that I am liable to pay HMRC the vat element of but can’t understand how to do it. If I input the invoice I received with zero vat then none is shown or declared on vat return how am I supposed to include the vat element of my invoice in line 1 on the vat return.
You enter the invoice with the amount you were charged by the supplier as the net, and then set the VAT rate to whatever rate you would have been charged by a UK supplier supplying you with the same services and charging you VAT (almost certainly 20%). This will appear to add VAT on top of the invoice total but when you tick the reverse charge option at the bottom the same VAT will be reversed back off again, leaving the total correct.
Hello @Wjax5
The below may be useful
https://support.quickfile.co.uk/t/domestic-reverse-charge-for-cis/40075
https://support.quickfile.co.uk/t/vat-options-explained/40202
That is what I have done but when I go to my vat return it adds the invoice and vat element onto my sales and then adds it back on to my purchases and takes off the vat. At what point do HMRC receive the vat of this invoice?
They don’t. With a normal purchase by a VAT-registered customer (you) from a VAT-registered supplier the VAT is paid from you (the purchaser) to the supplier, the supplier pays HMRC, then HMRC pays it back to you when you reclaim the purchase VAT on your next return - at the end of the day everyone is back where they started and the overall effect is simply that you have paid the net amount to the supplier.
The reverse charge process cuts out the supplier as the middle man - rather than you paying the VAT to the supplier and then reclaiming it from HMRC, you “pay” it to HMRC via box 1 and reclaim it via box 4 in the same return. Again, the end result is simply that you have paid the supplier the net value.
HMRC only actually earn anything from VAT at the very end of the chain where the eventual customer is not themselves VAT-registered.
Thanks for the help just a bit baffled as I would have normally paid the supplier the vat and that’s why I claim it back.
It still appears to show the net figure of the reverse charge purchase invoice in the sales line 6 on the vat return and this shouldn’t happen. Is there a Problem with the system.
Sorry to be a pain it’s just that I don’t want to get this wrong. Been doing these accounts perfectly fine on Here for last 3 years balancing to the penny and now this has come and thrown a spanner in the works.
There are two distinct types of reverse charge transactions supported by QuickFile, make sure you tick the right one:
- “CIS reverse charge” puts the VAT in box 1 & 4 and the net in 7 but not 6 (which is the correct treatment for domestic RC transactions in the construction industry)
- “reverse charge on services” puts the VAT in 1 & 4 and the net in both 6 and 7 (which is the correct treatment for reverse charge purchases of services from an overseas supplier)
Basically HMRC want to see every RC transaction in exactly one UK VAT return box 6 - for CIS that’s the supplier’s return, but for overseas services it’s your own return since the overseas supplier doesn’t submit UK returns.
Thank you for the help.
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