HMRC have made changes to how VAT is processed in the construction sector from 1 March 2021, introducing domestic VAT reverse charge. This article will provide an overview of these changes and how they apply to you.
Sage Accounting users where construction services are supplies and any goods are supplied in conjunction.
The new rules imposed by HMRC mean that those supplying construction services, that fall within the scope of the CIS, to a VAT-registered contractor, no longer account for the VAT themselves.
On 1 March 2021, Sage Accounting introduced a domestic reverse charge functionality to support this legislation (and provide for some other use-cases). Please also consult the guidance issued by Sage Accounting on the correct treatment of these changes.
AutoEntry support for this functionality was released on 9 March 2021. In AutoEntry, simply:
Re-sync your tax codes to obtain the two new "Domestic reverse charge" codes - for the Standard and Reduced rates respectively (for a note on re-sync'ing data see here), and then
Select the appropriate new tax code when coding up your invoice e.g.
Note that if either the invoice is dated pre-1 March, or it involves a customer or supplier that does not use the new VAT reverse charge in Sage Accounting (i.e. with the new "VAT Reverse Charge" tickbox disabled), then a warning message will display on attempting to publish e.g.
Lastly, if you attempted to publish an invoice dated from 1 March involving a customer or supplier that uses the VAT reverse charge in the week between Sage Accounting releasing their functionality (1 March) and AutoEntry support for it being released (9 March), then you will have received the following error:
1.base - VAT reverse charge cannot be applied
In this event, simply re-sync'ing your company data, unpublishing the invoice and selecting the new tax code that is now available in AutoEntry will allow you to publish the invoice correctly.
If you have any questions on this please contact us via webchat, and one of our team would be happy to go through it with you.
This article provides general rather than specific guidance to assist all of our customers. We always do our best to make sure that the information is correct but as it's general guidance, no guarantees can be made concerning its suitability for your particular needs. The information is valid at the time of publishing and is provided without any warranty of any kind, express or implied. You should take professional advice if you require specific guidance on your individual circumstances, for example to ensure that the results obtained from using our software comply with statutory or regulatory requirements. For VAT, customs and excise and duties enquiries you should call the HM Revenue and Customs (HMRC) National Advice Service Helpline on 0300 200 3700, contact your local HMRC office or visit their website at www.hmrc.gov.uk In no event will we be liable to you for any direct, indirect, consequential or incidental loss or damage arising out of or in connection with your use of the information provided.