This guide will explain how to record a Domestic Reverse Charge (DRC) for building and construction services transactions.
You must use the reverse charge, if you’re VAT registered in the UK, supply building and construction industry services and:
- your customer is registered for VAT in the UK
- payment for the supply is reported within the Construction Industry Scheme (CIS)
- the services you supply are standard or reduced rated
- you’re not an employment business supplying either staff or workers, or both
- your customer has not given written confirmation that they are an end user or intermediary supplier
How to use the VAT reverse charge if you supply building and construction services
Table of contents
2. Apply DRC to sales invoices
1. Enable DRC
To enable the VAT CIS Domestic Reverse Charge feature navigate to Settings > Configure system > Toggle features and click on the VAT & Bank Import Tool tab in the column on the left.
Use the radio button to enable the VAT Domestic Reverse charge for CIS box.
2. Apply DRC to sales invoices
If you are a subcontractor and need to apply DRC to your invoice, you can create a sales invoice with this applied.
First, head to Sales > Invoices > Create invoice.
Select Domestic Reverse Charge under the VAT Treatment drop down. This will apply the DRC treatment to the whole invoice - it is not possible to apply DRC to line items.
Save the invoice.
The invoice PDF will show that the DRC applies.
3. Apply DRC to bills
If you are a contractor and receive an invoice subject to the reverse charge you can create a bill with this applied.
First, head to Purchases > Bills > Create bill.
Select Domestic Reverse Charge under the VAT Treatment drop down. This will apply the DRC treatment to the whole bill - it is not possible to apply DRC to line items.
Save the bill.
4. VAT Return
Sales invoice with the DRC VAT treatment applied will appear in box 6. Bills with the DRC VAT treatment applied will appear on the VAT return within boxes 1, 4 and 7.
