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rebus46
June 28, 2023
Question

Reverse charge VAT

  • June 28, 2023
  • 2 replies
  • 0 views

Hi,

I have noticed on our VAT return that in the total VAT on sales section Box1, bills for our CIS subcontractors who are VAT registered are showing up in the sales section , they are also showing up in box 4.  Their reverse charge vat total is showing in the total of the VAT due on sales.

Is this correct, I thought sales vat was only taken from invoices as the payment of bills forms an expense.

Many thanks in anticipation

2 replies

paul72
paul72
June 28, 2023

Hi @rebus46 

As long as you're using 20.0% RC CIS (Reverse charge for CIS) it will be OK.

Do not use 20.0% RC SG or 20.0% RC MPCC - these are different reverse charges.

 

The correct operation of 20.0% RC CIS (Reverse charge for CIS) is as follows...

Code used on InvoiceCode used on Bill/Expense 

Nil VAT to Box 1

Net Sale to Box 6

20% VAT to Box 1 and Box 4
Net Purchase to Box 7

 

For reporting purposes, HMRC need to know how much VAT 'should' have been paid so - rather than simply report zero VAT, the 20% VAT is posted to both sides of the VAT Return which cancels out.

 

By the way, payment of Bills does form an expense (for tax purposes) but, when you're VAT registered, the VAT on the Bills does not.

 

Hope this helps.

R
rebus46Author
June 28, 2023

Hi Paul72,

Box 1 is also showing the 20%RC CIS Vat figures. 

 

This is what was confusing me - the £12,039.26 vat collected on sales includes the 20% RC CIS on bills.  

 

To confirm; you are saying that because the 20% RC CIS figures are also included in the paid on purchases box 4 section they cancel each other out so I do not need to worry about it?

 

Thanks for your answer

 

 

paul72
paul72
June 28, 2023

To confirm; you are saying that because the 20% RC CIS figures are also included in the paid on purchases box 4 section they cancel each other out so I do not need to worry about it?

 

Yes - that's right @rebus46 

You can see the ±VAT on the Bill entry screen...

So the result is no VAT to pay to HMRC, it's purely a reporting exercise unless you're the end user.

G
GeorgiaC
June 28, 2023

Hi rebus46, thanks for posting on the Community. As mentioned above, it's usual for the reverse charge code to post to your VAT return. When using the 5% or 20% RC CIS code for purchases, this will post the Net Purchase to Box 7 and the VAT at 5% or 20% (dependent on the code selected) to Box 1 and 4 - these values cancel each other out. On sales, the code will post the Net Sale to Box 7. To view our full guide on CIS and VAT codes in QuickBooks Online, click here.

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