AccountsPortal Help Documentation


Enable Construction Industry Domestic Reverse Charge VAT

If you are a VAT registered Contractor or Subcontractor in the Construction Industry, then the Domestic Reverse Charge VAT changes introduced on 1st March 2021 may impact your record keeping. Please ensure you are familiar with the changes detailed in the VAT reverse charge technical guide.

You can activate the required functionality in AccountsPortal by following the steps below.

Add Domestic Reverse Charge Tax Rates

  • Navigate to the Settings tab.
  • Click on the Tax Rates link.
  • Click on the Add Domestic Reverse Charge Tax Rates button.

    The following new rates will be automatically created:

    • 20% Income (Domestic Reverse Charge)
    • 5% Income (Domestic Reverse Charge)
    • 20% Expense (Domestic Reverse Charge)
    • 5% Expense (Domestic Reverse Charge)

Once the rates have been added, they will be available for use in transactions under the following conditions:

  • Your company is located in the United Kingdom (under Financial Settings)
  • You are VAT registered as at the date of the transaction
  • The date of the transaction is on or after 1 March 2021
  • You have selected one of the following VAT treatments for the transaction:
    • Sales/Income transactions: Goods or Services to UK Customer
    • Purchases/Expense transactions: Goods or Services from UK Supplier

Below is a simple example of a subcontractor charging a contractor for £100 worth of building services.

Reverse charge VAT treatment under the Standard VAT Scheme

  Transactions Not Under Reverse Charge Transactions Under Reverse Charge
Subcontractor (issues invoice)

Box 1: £20

Box 6: £100

Box 6: £100
Contractor (receives invoice)

Box 4: £20

Box 7: £100

Box 1: £20

Box 4: £20

Box 7: £100

Reverse charge VAT Treatment under the Flat Rate Scheme

The following example uses a flat rate of 10%.

  Transactions Not Under Reverse Charge Transactions Under Reverse Charge
Subcontractor (issues invoice)

Box 1: £12

Box 6: £120

Box 6: £100
Contractor (receives invoice)

N/A

Box 1: £20

Box 4: £20

Box 7: £100

Note that reporting VAT under the Cash Basis does not apply to domestic reverse charges. AccountsPortal will automatically treat the reverse charge VAT under the Accrual Basis. This means the VAT Report will include the invoice before payment.