Creating Reverse Charge VAT Rates

If you have selected HMRC as your VAT authority, then you can create two reverse charge VAT rates, one for standard rated services and one for zero rated services. Both use the Reverse charge (purchase of services) VAT treatment.

Reverse charge (purchase of services) – a reverse charge (external link) is used to simplify your VAT process so you do not need to register for VAT in each country to which you supply services. For the services you receive, you act as if you are both the supplier and the recipient of the services. The result is that you credit your VAT account with an amount of output tax, calculated on the full value of the supply you’ve received, and at the same time debit your VAT account with the input tax to which you are entitled. This will affect:

• Box 1 (VAT due in this period on sales and other outputs);
• Box 4 (VAT reclaimed in the period on purchases and other inputs (including acquisitions in Northern Ireland from EU member states));
• Box 6 (total value of sales and all other outputs excluding any VAT), and
• .

Note: Reverse charges relate to the purchase of services (and specific goods) abroad. This is in relation to Place of supply of services (external link), not Domestic reverse charge procedure (external link).

As they are an additional feature of VAT codes, VAT treatments apply at line level.

 

To create a reverse charge standard rate:

1. On the Set-up menu, click VAT. The VAT Rates window opens.
2. Click in the line above the grid to create a new VAT rate. Enter the following:
   • Rate – SR
   • Name – Reverse charge (standard)
   • Percentage – 0
   • Inclusive – clear
   • Used – select
   • VAT treatment – Reverse charge (purchase of services)
   • Treatment rate – 20
3. Click Confirm.

To create a reverse charge zero rate:

1. On the Set-up menu, click VAT. The VAT Rates window opens.
2. Click in the line above the grid to create a new VAT rate. Enter the following:
   • Rate – ZR
   • Name – Reverse charge (zero)
   • Percentage – 0
   • Inclusive – clear
   • Used – select
   • VAT treatment – Reverse charge (purchase of services)
   • Treatment rate – 0
3. Click Confirm.

See Also