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VT Transaction+

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.

To enter a sales invoice subject to domestic reverse charge:

Note: If you are on the cash accounting scheme for VAT, refer to Entering a DRC sales invoice (if on cash accounting) instead. If you are on the flat rate scheme for VAT, and enter a DRC invoice as described below, you then 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.

1.If you have already generated a sales invoice elsewhere, use the SIN function (or if you want to use VT Transaction+ to generate a sales invoice, see Raising a DRC sales invoice), and in the header section, enter:

Total

Output VAT

Net

Net amt

Blank or 0.00

Net amt

2.In the analysis of net amount section, enter:

Amount

Analysis Ledger

Analysis Account

Net amt

Income

The relevant account for the sale

Leave the Type of sale (for VAT purposes) setting as Normal.
For example, for sale of £100 worth of services:

SIN_DRC

Screenshot showing the entry of a sale subject to domestic reverse charge VAT

If you are entering a non-credit sale, you can use the REC function, and enter the sale in the same way as described above.

Completing your VAT return

When you run the VAT return, the transaction above will give rise to no VAT being included in Box 1, and the net value of the sale being included in Box 6, e.g. for a net sale of £100.00:  

VAT return element

Included in VAT return

Amounts included £

Net value of sale

Box 6

e.g. 100.00

Other points

The net amount will be picked up in box 6 of the VAT return, 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, double-clicking on an account and unticking/ticking Entries analysed to this account are normally within the scope of of VAT.

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.

SIN_DRC_&CIS

Screenshot showing the entry of a sale subject to domestic reverse charge VAT and CIS tax deduction

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.

CIS debtor