How to raise a VAT reverse charge invoice for a customer

From 1st March 2021, if you supply goods and services to the construction sector, then you will need to implement VAT reverse charging on your invoices.

Domestic reverse charge VAT legislation (DRC) is a change in the way Construction Industry Scheme (CIS) registered construction businesses handle and pay VAT. It is being introduced in the UK on 1 March 2021, having previously been delayed from October 2019.

Read on for step by step instructions on raising an invoice with a VAT reverse charge.

Configure your invoice items as VAT rechargeable

VAT reverse charge should be applied to certain items. For more information, see the VAT reverse charge guidance.

Note: If you are using Xero or QuickBooks, please see specific instructions for Xero or QuickBooks.

To enable VAT reverse charge on a specific item,

Go to the Invoices screen
Click Invoice options
Click Account settings
Check the VAT reverse charge option next to the relevant line item

Account Settings VAT Reverse Charge

Check the VAT reverse charge option for your customer

To enable VAT reverse charges for a customer’s invoice, choose the relevant customer from the connections screen, then

Click the three dots next to the customer name
Click Accounts settings

Connection Account Settings

Click the VAT Reverse Charge checkbox

Connection Account Settings VAT RC

Click Update account settings

Raise your invoice

You can now raise your invoices for your customer and the VAT reverse charge label will show for any VAT reverse chargeable items.

Note: VAT reverse charge is only available for invoices raised from a job.

Raise Invoice VAT Reverse Charge

The final invoice will show that Reverse charge applies and that the customer to account to HMRC for the reverse charge output tax on the VAT exclusive price of items marked reverse charge at the relevant VAT rate as shown above.

Final invoice with VAT Reverse Charge