Release 4.10.00

Version

4.10.00

Released

Aug 19

Summary

HMRC reverse charge VAT

Maintaining VAT codes in Pegasus Opera 3

Opera 3 Importer

Subcontractor Nominal Postings

Sage 50 Accounts

Sage 200

Impact on reverse charge VAT in the Republic of Ireland

Details

• Supported with Sage Payroll 2019 (v25).

• Updated Timesheet Matrix to use the Payroll Periods table to determine the default date when prompting for the payment date. Also add a new 'Timesheet Matrix Week Offset' flag to Labour Settings to manipulate the calculated date up or down to suit when timesheets are entered.

• Fixed Elite Messaging Service to make sure export paths are picked up in the same way as the system.

• Fixed the Site Requisition approval and posting routines to properly respect the corresponding 'By Requisition Number' flags.

• Fixed Contract Receipts sales allocation tagging so that partial allocations are allowed when no settlement discount has been offered.

• Fixed Purchase Invoices so that the base currency goods value is used when posting WIP for foreign currency invoices.

• Made sure Purchase Orders and Subcontractor Orders with cancelled items do not prevent the status on a Job Sales Phase from being changed.

• Fixed the SQL error on the Stock Code lookup of various Stock batches when the 'By Location' Stock Settings flags are set and the data is in Microsoft SQL Server.

• Fixed all Labour Timesheet reports to correctly convert the current month into a tax month for Timesheets that have not yet been posted to payroll.

• Fixed Generate Sales Invoices (SOP Jobs) routine so that all invoices are not consolidated at the Customer level and instead respect the consolidation settings.

• Updated the framework to prevent popup dialogs appearing on different monitors or off the edge of the screen when monitors with different scaling percentages are being used.

• Fixed Convert to PI for Multiple Jobs/NL operation on Purchases -> Purchase Invoice Register -> Invoices - Single Job to properly handle Reverse Charge VAT.

• Updated Deferred VAT Postings and Overhead Recovery batches to automatically export batch reports to a predefined location instead of prompting for a file name.

HMRC Reverse Charge VAT

The system has been fully updated to handle the processing of domestic Reverse Charge VAT but this will require both this system and your back office accounts system to be setup accordingly. Guidance for each back office accounts system is detailed below.

Report layouts updated for reverse charge VAT

Sales Invoice and Contract Certificate Invoice report layouts will need to be updated in accordance with this new legislation so that they meet the legal requirements. See the section titled ‘VAT documents’ towards the end of HMRC’s guidance document for more information about this. The Pegasus CIS standard layouts have all be updated to reflect this – use them as a guide when adjusting existing layouts.

Pegasus CIS documents updated with reverse charge VAT messages

VAT Codes settings for reverse charge VAT

Reverse charge VAT is applied to invoices based on the settings picked up from the VAT Codes table, i.e. VAT Codes need to be specifically setup to handle Reverse Charge VAT.

The actual figures posted to the VAT Return when reverse charge VAT is applied are as follows:

• Sales: The VAT that your Customer is due to pay on your behalf is calculated on all Sales Invoices, Contract Internal Valuations, Contract Applications & Contract Certificates so it can be displayed on invoice layouts, but the VAT value is not added to the invoice total. These VAT values are essentially only notional figures and ultimately a zero rated invoice is posted into the Sales Ledger. This will therefore only end up affecting Box 6 (Value of Sales) on the VAT Return.

• Purchasing & Subcontractors: The VAT that you (acting as the Customer) are due to pay on your Suppliers/Subcontractors behalf is calculated on all Purchase Invoices, Subcontractor Internal Valuations, Subcontractor Applications, Subcontractor Certificates, Subcontractor Invoices and Subcontractor Payments (in the case of Deferred VAT on Subcontractor Certificates), but the VAT value is not added to the invoice total as it is not due to be paid to the Supplier/Subcontractor. When these transactions are posted into the back office accounts system (via the Purchase Ledger for Purchase Invoices or as Nominal Journals for Subcontractor transactions), in addition to the usual postings affecting Box 4 (VAT on Purchases) & Box 7 (Value of Purchases) on the VAT Return, it also posts the VAT value to Box 1 (VAT on Sales).

After installing this upgrade, please ensure that you re-run the System Control -> Ledger Links -> Ledger Synchronisation -> Import VAT Codes routine to make sure the latest VAT settings are imported from your back office accounts system.

New settings to control where reverse charge VAT values  are posted

New fields have been added to General tab of the System Control -> System Setup -> System Settings form as follows:

• Allow Mixed VAT On Domestic Reverse Charge Transactions: HMRC does not officially allow an invoice with a mix of RC VAT and non-RC VAT but Pegasus have added this flag to allow flexibility in case a customer wishes to override this default position.

• Allow MITC Purchases Below Do Minimis Limit: Based on how VAT Codes are setup in the various back office systems, we do not have a guaranteed way to determine if the De Minimis limit should be applied. In previous versions this check was forced, along with a hard coded £5,000 limit, but the new changes for RC VAT could have made this an issue for customers so Pegasus has changed it into settings that could be turned off/on or be prompted to the user, as it would only apply to certain scenarios.

• MITC De Minimis Limit: When the above flag is set to “N” or “P”, any invoice with non-RC VAT goods value below this value will either be prevented or be prompted to the user to confirm.

The system also has two new settings to control where the VAT values (input and output) of reverse charge VAT are posted. These are setup in Subcontractors -> Subcontractor Setup -> Subcontractor Settings on the Reverse Charge VAT tab. If neither of these are specified, the system will use the Subcontractors VAT In account specified on the Nominal tab.

Please note that as all supported back office accounts systems have implemented reverse charge VAT differently when posting nominal journals. Reverse charge VAT Codes are not accessible out with the sales, purchase and subcontractor modules, however, as the subcontractors module posts all transactions to the back office via nominal journals, the postings generated differ based on the back office type selected. The only time this could cause a problem is when migrating from one of these systems to another; in this scenario, please make sure all pending postings are updated before migrating.

Maintaining VAT codes in Pegasus Opera 3 and Opera II

VAT Codes are setup and configured in the Administration -> VAT Processing -> VAT Codes menu.

For each VAT rate you require you will need to create two new reverse charge VAT Codes, one for sales and the other for purchases. For example, if in addition to ‘Standard Rate’ VAT you also need to reverse charge ‘Reduced Rate’ VAT, you will end up creating four new VAT Codes. There is no need to create a reverse charge VAT Code for zero rated goods – these can just be posted using the standard zero rate VAT Code (VAT Codes H/S/Z and H/P/Z for sales and purchases respectively in the Opera default setup).

All reverse charge VAT Codes should be setup as Country Type ‘H – Home Country’ and either Transaction Type ‘V – Reverse Charge Sale’ for sales; or ‘R – Reverse Charge Purchase’ for purchases. In addition to this, the Domestic Reverse Charge setting needs to be ticked so the Opera Importer bypasses the de-minimis value check.

Opera 3/ Opera II Importer

The Importer available with Opera 3 (2.61.02+) and Opera II (7.81.02+) is compatible with receiving reverse charge VAT postings.

Subcontractor Nominal Postings

When a nominal journal is posted to Pegasus Opera, any VAT value posted against a reverse charge Purchase VAT Code is automatically posted to both Box 4 (VAT on Purchases) and Box 1 (VAT on Sales) on the VAT Return. The nominal postings we generate to the Output VAT Nominal Account therefore do not specify a VAT Code to post them against; only the Input Goods and Input VAT do.

Sage 50 Accounts

In Sage 50 Accounts, VAT Codes are setup and configured in the Settings -> Configuration menu on the Tax Codes tab. All versions since v15/2009 have had support for reverse charge VAT with the addition of the ‘Reverse Charge’ flag on the Edit Tax Code screen and new company datasets get assigned VAT Code T20 as the default reverse charge VAT Code.

The way Sage have made this work is by making use of the ‘Link To’ field to specify which rate should be used for the reverse charge. It is important when creating new VAT Codes that the ‘Rate’ field remains at zero and the ‘Link To’ field is specified instead. If you need to reverse charge ‘Reduced Rate’ VAT then you will need to create a new VAT Code linked to the appropriate VAT Code (T5 – ‘Lower Rate’ in the Sage 50 default setup). There is no need to create a reverse charge VAT Code for zero rated goods – these can just be posted using the standard zero rate VAT Code (T0 – ‘Zero rated’ in the Sage 50 default setup).

Subcontractor Nominal Postings

When a nominal journal is posted to Sage 50 Accounts, any goods value posted against a reverse charge Purchase VAT Code is automatically used to calculate the corresponding VAT value (based on the VAT Rate entered against that VAT Code) which is then entered into both Box 4 (VAT on Purchases) and Box 1 (VAT on Sales) on the VAT Return. The nominal postings we generate to both the Input VAT and Output VAT Nominal Accounts therefore do not specify a VAT Code to post them against; only the Input Goods does.

Notes

1. As Sage 50 Accounts will always recalculate the reverse charge VAT value based on the goods value of the invoice (this applies to both Purchase Invoice and Subcontractor Invoices/Certificates), so there is no point in adjusting the value of VAT on any of these postings within the system (i.e. the Purchase Invoice VAT Split screen).

2. The Sage 50 API does not expose the Reverse Charge flag on the Edit Tax code screen so we have to use an alternate method to identify reverse charge VAT Codes. What they do expose is the ‘Link To’ and EC VAT related fields, so we are able to ignore all EC VAT codes and use the ‘Link To’ field to determine when a VAT Code links to a different code. The limitation with this method is that VAT Code T0 cannot be used for reverse charge VAT as this is the default for all other non-reverse charge VAT Codes and we have no way of identifying whether one has been specified or has just defaulted to T0. As most companies use the Sage 50 Accounts default VAT Code setup, this is unlikely to be a problem as T0 is ‘Zero rated’ and therefore would not apply to reverse charge VAT.

3. In order for the VAT element of these Sage 50 Accounts nominal journal postings to be correctly identified as VAT, the reverse charge nominal accounts setup on the Reverse Charge VAT tab of the ‘Subcontractor Settings’ screen should correspond to the ‘VAT on Purchases’ and ‘VAT on Sales’ accounts setup in the Settings -> Control Accounts screen within Sage 50 Accounts.

Sage 200

In Sage 200, VAT Codes are setup and configured in the Accounting System Manager -> Settings -> VAT Rates menu. All versions since v5/2008 have had support for reverse charge VAT with the addition of the ‘Reverse charge sales’ and ‘Reverse charge purchase’ options in the ‘EC Terms’ drop down list. By default, new company datasets are not created with any reverse charge VAT Codes so these will need to be setup accordingly.

For each VAT rate you require you will need to create two new reverse charge VAT Codes, one for sales and the other for purchases. For example, if in addition to ‘Standard Rate’ VAT you also need to reverse charge ‘Reduced Rate’ VAT, you will end up creating four new VAT Codes. There is no need to create a reverse charge VAT Code for zero rated goods – these can just be posted using the standard zero rate VAT Code (VAT Code 2 – ‘Zero Rated’ in the Sage 200 default setup).

Subcontractor Nominal Postings

When a nominal journal is posted to Sage 200, no automatic entries are made on the VAT return based on the fact that a reverse charge Purchase VAT Code was used. The nominal postings we generate to the Input Goods, Input VAT and Output VAT Nominal Accounts therefore all specify a VAT Code against them.

Impact on reverse charge VAT in the Republic of Ireland

The implementation of reverse charge VAT for the UK has also has a knock on effect for users in the Republic of Ireland. Reverse charge VAT was implemented for the construction industry in the Ireland over 11 years ago, before any reverse charge VAT legislation came into effect in the UK. The implementation we therefore had to come up with was not able to make use of reverse charge VAT handling built into any of the back office accounts systems. The Irish implementation is also slightly different in that invoices produced in Ireland should not have any indication of what VAT rates or values apply and that this is up to the principle contractor to determine.

We implemented a method for the system to recognise a single, specific zero-rated sales VAT Code as ‘reverse charge’ for sales transactions; and for other standard rated purchase VAT Codes to be able to be marked as ‘reverse charge’ for Subcontractor transactions.

With this new release, the need for a separate way of handling reverse charge VAT for Subcontractors has been removed. These codes should be adjusted in the back office accounts system to be officially recognised as reverse charge VAT Codes and the System Control -> Ledger links -> Ledger Synchronisation -> Import VAT Codes should be run to adjust the settings accordingly. The now obsolete Subcontractors -> Subcontractors Setup -> Select Reverse Charge VAT codes routine has therefore been removed.

On the sales side, the ‘Irish Reverse Charge VAT’ tab on the Sales -> Sales Setup -> Sales Invoice Settings / Contract Sales Settings screens remains in place (still only visible when the default scheme in the Subcontractors module is set to ‘RCT’). Although Irish companies can still setup reverse charge Sales VAT Codes in Pegasus Opera 3 and Sage 200 (as described above), this is not possible in Sage 50 Accounts (as highlighted in the ‘Additional Points To Note For Sage 50 Users’ section above), this option therefore remains to allow a zero rated VAT Code to be considered as reverse charge VAT.