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.
To enter a purchase subject to domestic reverse charge:
Note: If you are on cash accounting, refer to Purchases by contractors (if on cash accounting) instead.
Please ensure you are using the latest version of VT Transaction+ by downloading from our website (for VT Transaction+ only subscribers, download from here; for VT Final Accounts & VT Transaction+ subscribers, download from here)
1.Using the PIN (or PAY for a non-credit purchase) transaction, enter the following in the header section:
Total |
Input VAT |
Net |
Net amt |
0.00 |
Net amt |
Note that the P+R transaction cannot be used for this method.
2.In the analysis of net amount section, enter the following in this order:
Amount |
Analysis Ledger |
Analysis Account |
VAT amt (enter as a plus) - provided you can fully reclaim the VAT |
Creditors |
VAT - Input |
VAT amt (enter as a minus) |
Creditors |
VAT - Output |
Net amt |
Expenses/Cost of Sales |
The relevant account for the purchase |
| If you are entering a PIN transaction, leave the Type of sale (for VAT purposes) setting as Normal. |
| For example, for a purchase of £100 worth of services subject to the domestic reverse charge: |
| Screenshot showing the entry of a purchase subject to domestic reverse charge VAT |
If you enter the purchase as described above, the VAT return will automatically be populated with the required values in the appropriate boxes as follows:
VAT return element |
Included in VAT return |
Amount included (from the example above) |
Reverse charged output VAT |
Box 1 |
20.00 |
Input VAT reclaimable |
Box 4 |
20.00 |
VAT exclusive amount of purchase |
Box 7 |
100.00 |
If these do not appear correctly when running the VAT return, check that the following actions have been done:
•you have entered both the output VAT and input VAT described in step 2. above
•you have entered no VAT in the header of the purchase transaction described in step 1. above
•the analysis account for the purchase is set to being within the scope of VAT (by default, expense and cost of sales accounts are within the scope of VAT - this can be checked in account properties (Set Up>Accounts>All...select account>Properties)
Applying the CIS tax deduction
If you need to also apply the CIS deduction, follow the same steps as above, but with the following differences to step 2:
•an additional line is entered for the CIS deduction as a minus figure
•the value in the Total and Net fields is the VAT exclusive amount less the CIS deduction
For example, a purchase for £100 (exclusive of VAT) of services with a CIS deduction of 20% should be entered as follows, using the PIN or PAY transaction in the order shown:
Screenshot showing the entry of a purchase subject to domestic reverse charge VAT and the CIS tax deduction
The Creditors: 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.
Using this example, the VAT return will be populated with the same values shown in Completing your VAT return above.
