What is VAT domestic reverse charge?

A domestic reverse charge means the UK customer who receives supplies of mobile phones or computer chips must account for the VAT due on their VAT return, rather than the UK supplier.

Usually, when you sell goods or services to another VAT-registered business, you include the VAT on your invoice and account for it on your VAT return.

With reverse charge, you do not charge VAT on the sales invoice, although you do have to specify the VAT value and that the reverse charge rules apply. The business that buys the goods or services declares both the purchase and sales VAT.

Reverse charge sales list

From 1 July 2022, if you sell mobile phones or computer chips in the UK, you no longer need to compile and submit a Reverse Charge Sales List to HMRC.

VAT domestic reverse charge sales

Set up customers

You must specify that VAT Reverse Charge applies on the sales invoice for those customers who buy mobile phones and computer chips from you.

To do this:

1. Select Contacts and open the relevant customer record.
2. Select the Options tab, then select the VAT Reverse Charge checkbox.

For a new customer, select the checkbox from the Contact Details section.

Enter sales invoices

If you've set the customer up to use domestic reverse charge, a checkbox shows on the invoice.

1. Select Sales, then New Invoice.
2. Choose your customer, then select the Use VAT reverse charge checkbox when the reverse charge rules apply.
3. Enter the details of the invoice as normal and select the usual VAT rate for these goods. In most cases, this will be the standard VAT rate.
4. The VAT analysis section shows that the reverse charge rules apply and reverses the VAT value.
   
   
5. Select Save.

The VAT return

The effect on the VAT return is:

• The net value of the sale is shown in box 6 as normal
• The VAT does not show in box 1
  
  

VAT Cash Accounting

If you use the VAT Cash Accounting scheme, any invoice where reverse charge applies shows on your VAT return when you raise it, rather than when your customer pays it.

Flat Rate VAT

If you use the Flat Rate VAT scheme, any invoice where reverse charge applies shows in the box 6 figure, but not in the flat rate calculation.

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