We will be releasing an update that includes the Domestic Reverse Charge VAT legislation (DRC) week commencing 15th February 2021, this will be CIA Version 3.1 (Build 11). The release will be staggered in order of Company Name. When the User responsible for updates logs into CIA, they will be prompted to download the latest version.
Please check the correct User is set up for this by going to:-
Utilities>System Tailoring>Online>Automatic Updates
Ensure there is a tick in “Check for new version via the internet?” and the “User Responsible for Updates” is set to the correct User (use the […] to lookup if not).
If you have not been prompted to run the CIA Update by 28th February 2021, please contact our Support Department on 01935 443340.
How DRC works within CIA
When the update is loaded, two new VAT Codes will be automatically created:-
- ADRC – Domestic Reverse Charge – Standard Rate
- BDRC – Domestic Reverse Charge – Reduced Rate
If you do not wish to use these Codes and would prefer to create your own, this can be done within Company>Company Setup>VAT Rates>Add/Edit VAT Rate. If you create your own Code(s), you must ensure you select (✔) either “Domestic Reverse Charge Standard Rate VAT Code?” or “Domestic Reverse Charge Reduced Rate Code?”
If you are a CIS Subcontractor
You will no longer charge VAT to your CIS Customers (unless they are the End User). However, your Invoice must state that your Customer is responsible for the VAT and show the VAT amount that should be applied.
Within Utilities>System Tailoring>Printing Preferences>Sales Invoice/Application Printing
You will see there is a field for DRC Wording. There are three from which you can choose:-
- VAT Act 1994 Section 55A applies (This is the default if you do not alter)
- S55A VATA 94 applies
- Customer to pay the VAT to HMRC
Whichever you select will be printed on Sales Invoices and Application Certification Invoices when DRC applies and display the appropriate amount of VAT your Customer should report to HMRC.
Within Job Cost>Jobs, there is now a field for “VAT Code”. If your Contract/Job relates to DRC you can set the appropriate DRC VAT Code here and when entering Sales Invoices and/or Application Receipts, the correct VAT Code will be populated. To use the VAT Code held within the Job for Sales Invoices, you must use the option Sales>Invoice/Application by Job.
If this VAT Code is left blank, the default VAT Code attached to the Customer will be used, this can be overwritten at the time of Invoice entry if you prefer.
When entering Sales Invoices or Application Receipts and using a DRC VAT Code, no VAT will update the VAT Return. Only Box 6 (Total value of Sales) will be updated with the Net value.
If you are a CIS Contractor
When you receive an invoice from your CIS Subcontractor, you are responsible for reporting both the Input and Output VAT on that Invoice. The Subcontractor Invoice should display only the Net value of the Invoice, but should show in the narrative how much VAT should be reported.
Enter the Invoice using the appropriate DRC VAT Code. CIA will handle the reverse charge on the VAT Return automatically and update the Subcontractors ledger with the correct amount owing.
When entering Subcontractor Purchase Invoices or Application Payments using a DRC VAT Code, the VAT Return will automatically update Box 1 (VAT due in this period on sales and other outputs), Box 4 (VAT reclaimed in this period on purchase and other inputs) and Box 7 (Total value of and all other inputs excluding VAT). Therefore Box 1 and Box 4 cancel each other out meaning no VAT is payable or reclaimable on the transaction.
You may feel that the Domestic Reverse Charge VAT legislation will affect your cash flow, HMRC have suggested that if this is so you can apply to change to Monthly VAT Returns. We would suggest you take advice on this from your Accountant or another advisor.