Setting up domestic reverse charge for sales of mobile phones and computer chips

This topic applies to Reverse Charge Sales of mobile phones or computer chips only. Set up instructions for domestic Reverse Charge goods and services are in the Setting Up VAT Codes for Domestic Reverse Charge VAT Help topic.

See the Domestic Reverse Charge mechanism Help topic for background information.

1. Select the RC Sales List option on the Company Profiles form if you sell the items for values above the de minimis level.

2. Check the Reverse Charge De minimis level on the System Preferences form. If HMRC change the level, you can update it here.

3. Open the System folder and click VAT Processing or click the Administration tab on the Ribbon Bar and then click VAT Processing.

4. Create Reverse Charge Sales and Reverse Charge Purchase VAT codes.

   • A Reverse Charge Sales code updates only Box 6 (Value of Sales). Example from a Sales perspective...

     You send an invoice to your customer with a goods value of £8750 and a VAT value of £481.25. The invoice has two detail lines, one of which is subject to the Reverse Charge. It indicates clearly that part of the invoice is subject to the Reverse Charge. Click here to see the invoice.

     Item	Goods Value (£)	VAT Value (£)	Subject to Reverse Charge
     Mobile Phones	6000.00	1050.00*	Yes
     Phone Chargers	2750.00	481.25	No
     Total	8750.00	1531.25

     Your VAT Return is updated in the following way:

     • Box 1 (Output Tax) is updated only with the £481.25 VAT for the Phone Chargers

     • Box 6 (Value of Sales) is updated with Total Goods value of £8750.00

     Your customer must account for the Output Tax on the mobile phones of £1050. *

   • A Reverse Charge Purchase code updates Box 1 (Output Tax), Box 4 (Input Tax), and Box 7 (Value of Purchases). Example from a Purchase perspective..

     You receive an invoice from your supplier with a goods value of £8750 and a VAT value of £1531.25. The invoice has two detail lines, one of which is subject to the Reverse Charge. The invoice clearly indicates that the Reverse Charge applies to some of the invoice.

     Item	Goods Value (£)	VAT Value (£)	Subject to Reverse Charge
     Mobile Phones	6000.00	1050.00 *	Yes
     Phone Chargers	2750.00	481.25	No
     Total	8750.00	1531.25

     Your VAT Return is updated in the following way:

     • Box 1 (Output Tax) is updated with the Reverse Charge VAT value of £1050.00 *

     • Box 4 (Input Tax) is updated with total VAT value of £1531.25

     • Box 7 (Total value of Supplies) is updated with Total Goods value of £8750.00

     Therefore Input Tax of £481.25 (Box 1 - Box 4) from the item that is not subjected to the Reverse Charge is reclaimed from HMRC.

5. Select the Reverse Charge option for each stock item or product record where the Reverse Charge accounting procedure applies. The option is displayed in the Stock - Processing command on the Options form and where the Stock module is not used, in the SOP/Invoicing - Maintenance - Products and P.Orders - Maintenance - Products commands.
   
   You can identify a Reverse Charge item by an icon that appears in the form's status bar:
   
   

6. Your sales invoice and credit note designs must be updated to indicate when the Reverse Charge accounting procedure has been used on a transaction. You can check the default invoice design to see what needs to be done.

   • Each line on the document must indicate whether it is a reverse charge item.

   • The VAT Analysis section of the document must indicate whether VAT is subject to the Reverse Charge procedure.

   • The VAT value that is being reverse charged must be displayed after the final line of the document.

7. The total goods value for all reverse charge lines on the invoice will determine whether an invoice is subject to the reverse charge. To process an invoice for a VAT registered customer above the HMRC de minimis level, use a Reverse Charge Sales VAT code.  You can use Reverse Charge codes on credit notes even if the goods value is below the de minimis level.
   
   Use a Reverse Charge Purchase VAT code when you receive an invoice or credit note that are subject to Reverse Charge accounting from a VAT registered supplier.

7. If the RC Sales List option in the Company Profiles command is selected, create the RCSL upload file at the same time as committing your VAT Return in the MTD VAT Centre using the Commit command. Submit the RCSL to HMRC using VAT Online Services, whether or not you actually make Reverse Charge supplies. You must submit the RCSL for each VAT period until you permanently cease to make these supplies, when you must tell HMRC the date on which you ceased.