From 1st March 2021, if you supply goods and services to the construction sector, then you will need to implement VAT reverse charging on your invoices.
Domestic reverse charge VAT legislation (DRC) is a change in the way Construction Industry Scheme (CIS) registered construction businesses handle and pay VAT. It is being introduced in the UK on 1 March 2021, having previously been delayed from October 2019.
Read on for step by step instructions on raising an invoice with a VAT reverse charge.
VAT reverse charge should be applied to certain items. For more information, see the VAT reverse charge guidance.
Note: If you are using Xero or QuickBooks, please see specific instructions for Xero or QuickBooks.
To enable VAT reverse charge on a specific item,
- Go to the Invoices screen
- Click Invoice options
- Click Account settings
- Check the VAT reverse charge option next to the relevant line item
To enable VAT reverse charges for a customer’s invoice, choose the relevant customer from the connections screen, then
- Click the three dots next to the customer name
- Click Accounts settings
Click the VAT Reverse Charge checkbox
Click Update account settings
You can now raise your invoices for your customer and the VAT reverse charge label will show for any VAT reverse chargeable items.
The final invoice will show that Reverse charge applies and that the customer to account to HMRC for the reverse charge output tax on the VAT exclusive price of items marked reverse charge at the relevant VAT rate as shown above.
For more information on raising invoices, see