The new VAT rules for HMRC’s Domestic Reverse Charge for the Construction Industry Scheme comes into effect on 1 March 2021. If you are using software to prepare your bookkeeping, you will need to use new VAT codes to account for these transactions. The new VAT codes can be found as follows:-
Sage Line 50
T21 – CIS reverse charge Standard Rated
T26 – CIS Reverse charge Reduced Rate
If these codes are already in use, the numbers will be different. To check the codes to use on your software, go to:-
Settings, then Configuration and then Tax Codes.
If you select T21 or T26 on a sales invoice, this will enter the net figure into Box 6 of the VAT return but will not show VAT in Box 1 (as per the rules from 01/03/21). If you are using Sage to create your sales invoices as well, a note should appear on the sales invoice to say VAT of £….. needs to be included on the customers VAT return.
If you select T21 or T26 on a purchase invoice then VAT will be recorded in boxes 1 and 4 of the VAT return and the net purchase will show in Box 7.
You will need to activate the new codes. To do this:-
- Go to settings
- Advanced Settings
- Tax Rates (you should see an option to Add Domestic Reverse Charge Tax Rates on this screen.
Once selected this will then add new rates as follows:-
- Domestic Reverse Charge @ 20% (VAT on Income)
- Domestic Reverse Charge @ 5% (VAT on Income)
- Domestic Reverse Charge @ 20% (VAT on Expenses)
- Domestic Reverse Charge @ 5% (VAT on Expenses)
12 March 2021 Edit: You can find the updated QuickBooks process here.
QuickBooks will be announcing details of the new codes to use shortly. To be able to use the codes you will need to enable VAT and CIS in QuickBooks.
There will be 2 new VAT codes for 20% and 5% VAT to use.
There will be a VAT Reverse Charge box to select for existing and new Suppliers and Customers. If you have entered in the CIS and VAT details for the supplier/customer, the VAT Reverse Charge box will automatically be selected.
The option van be overridden on an invoice by invoice basis. You will see a tick box on the invoice itself to do this.
Select the VAT rate to use as usual and you should see a note on the invoice to show that the VAT Reverse Charge has been calculated.
If you require any assistance or advice regarding this, please contact us.
February 24th, 2021