The following information is for general guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. To determine the VAT treatment for your particular transactions please refer to HMRC guidance or seek tax advice from an accountant.
Introduction
For an overview, please refer to Sales by subcontractors (if on cash accounting).
To enter a DRC sale outside of the cash accounting scheme:
Note: If you are not on cash accounting, refer to Entering a DRC sales invoice instead.
1.Leave the Cash Accounting setting ticked in the VAT set up dialog (Set Up>VAT)
2.Create a new Income account (Setup>Accounts>All>New) and name it something like ‘Domestic reverse charge services’.
3.Do not tick ‘Entries analysed to this account are normally within the scope of VAT’. This is to prevent the transaction from being picked up in the VAT return under the cash accounting method. Instead, it will be picked up in the VAT return under the standard accounting method by the journal described in step 5.
4.Enter the sale using a SIN, SIN or REC transaction; in the header section enter:
Total |
Output VAT |
Net |
Net amt |
Blank or 0.00 |
Net amt |
| In the Analysis of net amount section, enter: |
Amount |
Analysis Ledger |
Analysis Account |
Net amt |
Income |
The account created in step 2. |
For example, for a sale of £100 of services:
5.To record the net value of the sale in the VAT return, use the JRN function (or journal import function) to enter the following journal with the same date as the sale transaction in step 4.
Debit |
Credit |
Ledger |
Account |
Net |
0.00 |
Creditors |
VAT - Output |
0.00 |
|
0.00 |
Creditors |
VAT - Output |
Net amt - enter as a minus figure |
| For example, for a net sale of £100.00: |
| Screenshot of a journal entry to record the net value of the sale in the VAT return |
| You should also make reference to the transaction number of the transaction from step 4. in the Transaction details/entry details field. |
Applying the CIS tax deduction
If you need to also apply the CIS deduction, follow the same steps above, with the only differences being the following in step 4:
•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, for £100 (exclusive of VAT) of services, with a CIS deduction of 20%:
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.
