The reverse charge for services received from outside the UK is covered
here.Opera Help
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The VAT domestic reverse charge mechanism is an anti-fraud measure designed to counter criminal attacks on the UK VAT system by means of sophisticated fraud. Following the domestic reverse charge mechanism means that the buyer rather than the seller must account for the Output VAT to HMRC.
Please visit www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-notice-735 for details (VAT Notice 735).
For the purposes of this Help topic, these goods and services come under the umbrella of the domestic reverse charge mechanism:
Reverse charge sales of mobile phones and computer chips
From October 2020 building and construction services.
These other goods and services mentioned at www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-notice-735 are not covered in this Help system:
Wholesale gas
Wholesale electricity
Emission allowances
Wholesale telecommunications
Renewable energy certificates.
The reverse charge for services received from outside the UK is covered
here.
This affects supplies of mobile phones or computer chips when a transaction including mobile telephones or computer chips - that HMRC refers to as 'reverse charge sales' - exceeds the HMRC de minimis level of £5000, exclusive of VAT. You must not include supplies of gas, electricity, emissions allowances, telecommunications services, renewable energy certificates or building and construction services.
If you make reverse charge sales you must notify HMRC and submit regular RCSLs using the RCSL system. The Reverse Charge Sales List (RCSL) report is designed to be submitted electronically via the HMRC web site and the Government Gateway.
Supplies to customers in the United Kingdom who are not VAT registered are unaffected by reverse charge accounting so suppliers must account for the output VAT in the normal way.
For the purpose of the reverse charge, mobile telephones include:
Any handsets that have a mobile phone function (i.e. the transmitting and receiving of spoken messages), whether or not they have any other function - it therefore includes other communication devices, such as Blackberry.
Mobile phones supplied with accessories (such as a charger, battery, cover or hands-free kit) as a single package and Pay As You Go mobile phones.
The reverse charge does not apply to the following:
Mobile phones that are supplied with contracts for air time.
Mobile phone accessories which are supplied separately from a mobile phone.
3G data cards or Wi-Fi cards.
As a guide, all computer chips covered by the reverse charge fall within the tariff commodity code 8542 3190 00. The term covers the following:
Small integrated circuits (Central Processing Units or CPUs)
Discrete integrated circuit devices (Microprocessors or Microprocessor Units - MPUs)
Microcontrollers or Microcontroller Units (MCUs)
Chipsets - the dedicated cluster of integrated circuits that support MPUs.
The reverse charge applies to such items when they are in a state prior to integration into end user products. Items such as computer servers, laptops or desktop units are excluded from the scope of the reverse charge.
Setup: See the Setting Up for Domestic Reverse Charge Sales Help topic.
From October 2020, building and construction services companies will be required to process invoices using a new domestic reverse charge VAT mechanism. Under this domestic reverse charge VAT procedure the main contractor would account for the VAT on the services of any subcontractor and will have to pay the VAT due to HMRC instead of paying the subcontractor. If the service is zero or exempt rated for VAT then reverse charge VAT will not apply.
Please visit www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services for details.
Reverse Charge VAT is applied to invoices based on the settings picked up from the VAT Codes form. VAT Codes must be specifically setup to handle reverse charge VAT.
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 affects 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. |
This affects Box 4 (VAT on Purchases), Box 7 (Value of Purchases) and Box 1 (VAT on Sales .on the VAT Return. |
Setup: See the Setting up domestic reverse charge VAT codes for building and construction Help topic.