A Quick Guide to CIS Reverse Charge

What is Reverse Charge?

There have been changes made to the way VAT is charged within the Construction Industry Scheme. But don’t worry, Sage Accounting has been updated to ensure you can process this as simply as possible,

It’s now the responsibility of the Main Contractor, rather than the Subcontractor to account for VAT in their VAT Return. So for Subcontractors, VAT is no longer charged on the Sales Invoice, but recorded by Main Contractors when they record the Purchase Invoice.

However, there are still some circumstances that will not fall under Reverse Charge in this way. For End Users and Intermediaries, Reverse Charge should not be applied to invoices received from your Subcontractors. Additionally, under normal circumstances, Reverse Charge would be applied to the whole invoice, including materials. But if the value of the Reverse Charge is 5% or less than the value of the whole invoice, this can be disregarded, and normal VAT Rules will apply instead. You can read more about when Reverse Charge does not apply here.

 

How to process Reverse Charge

It couldn’t be easier to set up your account ready for Reverse Charge. First however, you will need to ensure CIS is enabled in your account. To do this, you can follow the steps here.

For both Main Contractors, and Subcontractors, you will also need to ensure their contact record is set up correctly, with a VAT number and the ‘Reverse Charge VAT’ box ticked. This can be found in the ‘Account Details’ section when creating a new contact record, or the ‘Options’ tab for existing contacts.

When creating a Purchase/Sales Invoice, Estimate, or Quote, you will need to ensure the ‘Use VAT Reverse Charge’ box is ticked (which should be by default for your Reverse Charge contacts).

For Subcontractors, once your invoice has been recorded, you should see the VAT amount displayed on the invoice but reversed so no VAT is charged. Your Net Sale is recorded in box 6 of your VAT Return as normal. For Main Contractors, the VAT on the invoice is shown and reversed, so no VAT is charged. For the VAT Return, it will show as a sale in box 1 as well as a purchase in box 4.

 

Help and Support

We’re always here to provide as much information on new changes as we possibly can. You can find out more about CIS Reverse Charge in our great Help Guide here.

Have a question? Why not pop over to our Sage City Forum and ask or have a look to see what others are asking here. If you’re up for it, you can even provide some answers as well!

If you need a little further support, our Q&A Live is open Monday to Friday 9am-5pm for you to drop in and speak to a Sage Expert within seconds. Ask as many questions as you want and stay as long as you need! Join us here.

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