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Reverse charge VAT and CIS

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Summary

How to set up and apply reverse charge VAT to your CIS invoices in Sage Accounting.

Description

This applies to VAT-registered businesses that buy and sell services under the Construction Industry Scheme.

Under these rules,the contractor buying from a subcontractor must report the VAT. This is known as reverse charge VAT.

Resolution

What is reverse charge VAT?

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

With reverse charge VAT, the contractor is responsible for reporting both sales and purchase VAT on their VAT return. The subcontractor does not report the VAT from their sales.

Under the new rules

  • If you're a subcontractor, you do not include VAT on the sales invoice. You do have to include the VAT value and show that you are applying reverse charge rules
  • If you're contractor is buying the goods or services, you record the reverse charge VAT when you receive the purchase invoice. You report the VAT as both a sale and a purchase on your VAT return

How it works in Sage Accounting

Other considerations

Useful links

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Check out guidance from the GOV.UK


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