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Sage 200 - CIS Reverse Charge VAT - Workaround for older versions of Sage 200

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Summary

Sage 200 Professional requires additional 3rd party software in order to fully support all CIS legislation. This article describes how it would be possible to process the new CIS Reverse Charge VAT legislation on older versions of Sage 200 Professional and Sage 200 Extra Online.

Description

NOTE: Since this article was created, the government have delayed the date to which this legislation comes into action from October 2019 to March 2021, more information can be found here.

No support will be offered from Sage in relation to this workaround, CIS legislation or general processing to meet CIS requirements. The way in which VAT is charged on construction services will change from 1 March 2021, as a result of new anti-fraud rules.

This will impact domestic supplies (UK Only) where payments are reported under the 'Construction Industry Scheme', more specifically supplies of services that are Standard Rate (20%) or Reduced Rate (5%).

Sage 200 Summer 2019 Enhancements release contains functionality to support the new reverse charge legislation, recommended to be used in conjunction with a 3rd party CIS solution.

Contact the vendor of your 3rd party CIS solution if you need any assistance in preparation for these changes, or any other queries relating to CIS. 

Customers on earlier versions of Sage 200 may require the following workaround to support this new legislation.

Resolution

TIP: Eque2 have provided the the following documentation for their CIS Solution,  Domestic Reverse Charge VAT and How to configure VAT codes in Sage 200 for Construction Reverse Charge VAT (Spring 2019 Enhancements or earlier).

Limitations of Workaround

  • The workaround will not support the use or postings for offering Early Settlement Discount.
  • The workaround will not support VAT Inclusive Pricing.
  • The workaround will not support customers working in a non-base currency.
  • The Reverse Charge Purchases VAT code can only be used for Standard item lines (not Free text item lines).
  • It is only possible to set up a single reverse charge purchase VAT Code.
    • If you receive purchases of 5% and 20% then this workaround will not work and you must upgrade to Summer 2019 or above.
    • If you are already using the Reverse Charge Purchases VAT terms for use with carousel fraud then you must upgrade to Summer 2019 or above.
    • If you are already using the Reverse Charge Purchases VAT terms for Postponed VAT Accounting the same code would need to be used which could make analysis more difficult.

Sage 200 Professional Summer 2019 Enhancements offers a more integrated solution but will still require a 3rd Party CIS solution. 

Steps for Initial Setup

Sales

You will need to create two new VAT rates in the program as below. These should be copies of the Standard VAT Rate, be given an appropriate description, using the applicable rate of VAT and set to be included in the VAT Return.

To create new VAT rates, open the Settings menu within Accounting System Manager and choose VAT Rates.

Code/RateDescriptionNameVAT ReturnTerms%
211Construction Industry Scheme Sales 20%CIS Sales 20%YesNot Applicable20.00
221Construction Industry Scheme Sales 5%CIS Sales 5%Yes

Not Applicable

5.00
1  Customers have the flexibility to create their own codes, these are example codes but are also used on the supplied SOP Invoice layout (this will need to be amended if different codes are used).

Boxes VAT codes affect on the VAT Return

VAT RateSale or PurchaseNet or VAT amountBox
21SalesNet
VAT11
22SalesNet6
VAT11

The VAT amount is negated by producing a VAT Only credit note (as detailed in Steps to be repeated for every sales invoice generated section below).

This will separate these transactions from others in the system and will support any reconciliation required.

Purchases

You can only create one new VAT rate in the program, choosing either 5% or 20%. This should use the existing Reverse Charge VAT Rate Term, be given an appropriate description, using the applicable rate of VAT and set to be included in the VAT Return.

Code/RateDescriptionNameVAT ReturnTerms%
231Construction Industry Scheme Purchases CIS Purchases  Yes

Reverse Charge Purchases2

5.00 or 20.003

Customers have the flexibility to create their own codes, this is an example codes. It is only possible to set up a single reverse charge purchase VAT Code so many need to use an existing code if the terms have already been used.

This VAT Code using these term can only be used for Standard item lines (not Free text item line).

It is only possible to set up a single reverse charge purchase VAT Code, if you receive purchases of 5% and 20% this workaround is not suitable and you will need to upgrade.

Boxes VAT codes affect on the VAT Return

VAT RateSale or PurchaseNet or VAT amountBox
18PurchasesNet7
VAT1 and 4
Steps to be repeated for every invoice generated

Sales

  • Invoice - Raise an invoice with the relevant new VAT code. You will need to make sure that you don't mix and match VAT rates on the invoice. Where a service is supplied, all goods supplied in conjunction will also be subject to the reverse charge. (This will affect boxes 1 & 6 on the VAT Return).
  • Credit - Raise a VAT Only credit note.  Use the same VAT rate and VAT amount as the invoice undergoing Reverse Charge. (This will affect box 1 on the VAT return, reversing the VAT.  Credit note must not be printed and sent to the customer).
  • Print Invoice -  The new invoice layouts (available here, see the Help Files for instructions on using alternative layouts) reduces Gross VAT, removes VAT and adds in the Reverse Charge text on to the invoice. This will ensure the customer (Contractor / Sub-Contractor) knows they are responsible to pay the VAT.
  • Statement - Your 3rd Party CIS solution vendor should be able to provide you with a new statement that advises that credit notes will be shown where CIS Reverse Charge VAT is in play.

Purchases

Raise invoice using the new VAT code where appropriate.

Other points to note:

  • Users are responsible for ensuring that the correct combination of VAT Rates for a CIS & NON-CIS Invoices is used.
  • The workaround will not support invoice consolidation. This should be disabled.
  • The workaround will result in a customer statement showing a mixture of postings for the invoice and the credit note.
  • The workaround relies on the VAT Rates being created using Code 21 for 20% - Sales Reverse Charge and Code 22 for 5% - if any other codes or rates are used the layout will need to be adjusted.
  • We have provided an example invoice layout, which can be used in both Invoicing & SOP. If you require adjustments to this or any other layout you could use our Report Design Service
  • The layout supplied by customer services provides a single version of the HMRC prescribed reverse charge text only.
  • The gross values in Sage 200 will appear in forms with the VAT included. The VAT figure will also be displayed.
  • Gross values on printed Purchase Order documentation will include the VAT amount within the totals.