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.
From within Xero,
- Go to the Account menu
- Select Advanced
- Click Add Domestic Reverse Charge Tax Rates
- Click Add Domestic Reverse Charge Tax Rates to confirm
For more information, see Xero support.
To add or edit a product or service to include the VAT reverse charge
- Go to the Business menu
- Select Products and Services
- Edit an existing Item, or select + New Item
- Enter the details for your item including the Unit Price, Sales Account and Description
- Select the new Domestic Reverse Charge rate you added previously.