The domestic reverse charge, sometimes called reverse VAT, means your customer accounts for the VAT to HMRC instead of paying it to you. It applies to certain building and construction services between VAT-registered businesses in the UK. In Commusoft, you apply it by choosing a Domestic reverse charge rate on the invoice, and the invoice then shows no VAT for the customer to pay.
How to apply the domestic reverse charge
Step 1: Start the invoice
âĄď¸ Go to the job, then click Invoices > Add new invoice.
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Fill in the invoice details as usual, including the invoice type, description, business unit and invoice breakdown.
Step 2: Choose the reverse charge rate
The VAT list offers three reverse charge rates alongside the normal ones: Domestic reverse charge @ 20, Domestic reverse charge @ 5 and Domestic reverse charge @ 0. Choose the one that matches the VAT rate your customer will account for.
Option A: No breakdown
Enter the Sub total.
Click the VAT field and choose the Domestic reverse charge rate.
Option B: Full breakdown
Add your line items.
In the VAT column, choose the Domestic reverse charge rate for each line the reverse charge applies to.
Leave the normal VAT rate on any lines it doesn't apply to.
Step 3: Save the invoice
Check the totals at the bottom of the form.
Click Save invoice, or Save as draft invoice if the figures aren't settled yet.
What happens next
The totals show VAT (0%) at ÂŁ0.00 for the reverse charge amount, so the grand total is the net amount. For example, a ÂŁ100.00 sub total with Domestic reverse charge @ 20 has a grand total of ÂŁ100.00.
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When the invoice goes to your accounting package, what happens to the reverse charge depends on the package:
Xero and Sage Business Cloud Accounting: the integration supports the domestic reverse charge, once it's set up in the package.
QuickBooks Online, QuickBooks Desktop, Sage 200 and Kashflow: the integration doesn't support the domestic reverse charge, so record the reverse charge adjustments directly in your accounting package.
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For setting up CIS and the domestic reverse charge in Xero and Sage, see CIS Percentage.
Best practices
Set up your accounting package first: add the domestic reverse charge tax rates in Xero, or enable CIS and the domestic reverse charge for contacts in Sage Business Cloud Accounting, before you raise your first reverse charge invoice.
Use 0.00 for a 0% reverse charge in Xero: if you sync to Xero and need a 0% reverse charge, choose the normal 0.00 rate instead of Domestic reverse charge @ 0.
Check the work qualifies: the reverse charge only applies to certain services and customers, so check with your accountant if you're not sure it applies to a job.
Common questions
Can I use a full breakdown with the domestic reverse charge?
Can I use a full breakdown with the domestic reverse charge?
Yes, you can use a full breakdown with the domestic reverse charge. Each line item has its own VAT column, so you can apply the reverse charge to the lines it covers and the normal VAT rate to the rest.
Can I apply CIS and the domestic reverse charge on the same invoice?
Can I apply CIS and the domestic reverse charge on the same invoice?
Yes, you can apply CIS and the domestic reverse charge on the same invoice. With a full breakdown, each line item has a CIS column as well as a VAT column. For how CIS works, see CIS Percentage.
Why does my reverse charge invoice show no VAT?
Why does my reverse charge invoice show no VAT?
A reverse charge invoice shows VAT at 0% because your customer accounts for the VAT to HMRC, not you. The rate you chose is still saved on the invoice.
Why won't my reverse charge invoice send to my accounting package?
Why won't my reverse charge invoice send to my accounting package?
If a reverse charge invoice won't send to Xero, check the domestic reverse charge tax rates are added in Xero, and use the normal 0.00 rate for a 0% reverse charge. If you use QuickBooks Online, QuickBooks Desktop, Sage 200 or Kashflow, the integration doesn't support the domestic reverse charge, so manage it directly in your accounting package.
What if I don't see the Domestic reverse charge rates?
What if I don't see the Domestic reverse charge rates?
If the Domestic reverse charge rates don't appear in the VAT list, ask AI:den in the in-app chat or email [email protected].