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Rachel Keeley
March 4, 2021
Solved

Flat Rate Scheme and the new Domestic Reverse VAT Charge

  • March 4, 2021
  • 1 reply
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Are QuickBooks able to set up a new tax code with regards the domestic reverse VAT Charge for flat scheme users, invoices to contractors within the new scheme do not need to be accounted for under the FRS (so in essence outside the scope for VAT) but the information of the reverse charge still needs to be shown on the invoice so that the contractor accounts for the VAT in the normal way under the new rules, what is needed is a VAT Code for the reverse charge which will not include this transaction in the sub contractors VAT Reports but makes a note on the invoice of the amount of VAT under this new scheme. Hope that all makes sense?!!!!! Thank you.

Best answer by Ashleigh1

Hello Rachel Keeley, 

 

Welcome to the Community page, 

 

 

So customers who are on and using the Flat Rate Scheme, is not supported under the CIS DRC. You will need to discuess your options with your accountant and ultimately HMRC to move away from FRS. Reverse charge supplies are not to be accounted for under the scheme. Flat Rate Scheme users who receive reverse charge supplies will have to account for the VAT due to HMRC and recover it simultaneously on the same VAT Return.
Users of the Flat Rate Scheme will have to consider if it’s still beneficial to them bearing in mind that under the scheme they cannot recover VAT incurred on purchases of materials, overheads and so on.(Reference section 13- https://www.gov.uk/guidance/vat-reverse-charge-technical-guide#flat-rate-scheme)

 

1 reply

A
Ashleigh1Answer
March 4, 2021

Hello Rachel Keeley, 

 

Welcome to the Community page, 

 

 

So customers who are on and using the Flat Rate Scheme, is not supported under the CIS DRC. You will need to discuess your options with your accountant and ultimately HMRC to move away from FRS. Reverse charge supplies are not to be accounted for under the scheme. Flat Rate Scheme users who receive reverse charge supplies will have to account for the VAT due to HMRC and recover it simultaneously on the same VAT Return.
Users of the Flat Rate Scheme will have to consider if it’s still beneficial to them bearing in mind that under the scheme they cannot recover VAT incurred on purchases of materials, overheads and so on.(Reference section 13- https://www.gov.uk/guidance/vat-reverse-charge-technical-guide#flat-rate-scheme)

 

R
RKeeley
March 5, 2021

I spoke to HMRC and it is supported as I understand, with the FRS the sales under the new domestic reverse charge are to be excluded from their VAT returns as in theory they are not charging any VAT however they are still required to have the info on the invoices for the contractors i.e. showing the amount of VAT and that's what I was trying to get across.

 

Many thanks,

 

Rachel

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