Domestic Reverse Charge VAT (UK only)

Domestic Reverse Charge (DRC) is a new way of accounting for VAT. From 1st March 2021 DRC applies to all VAT registered construction businesses in the UK. Put simply, the legislation moves the VAT liability from the supplier (subcontractor) of a service in the construction industry to the customer (contractor).

The legislation has been introduced as an anti-fraud measure designed to counter sophisticated criminal attacks on the UK VAT system. It intends to cut down on “missing trader” fraud, where companies receive high net amounts of VAT from their customers but have no intention of paying the VAT to Her Majesty's Revenue and Customs.

Requirements for dealing with the DRC

When the DRC applies to an item on their invoice, the supplier:

  • Must make it clear on the invoice that the DRC applies and that the customer is required to account for the VAT.
  • Must clearly state how much VAT is due under the reverse charge, or the rate of VAT if the VAT amount cannot be shown.
  • Must not include VAT in the amount charged to the customer.

Send your quotes and invoices from WorkflowMax

In order to produce quotes and invoices that show the DRC, follow these steps:

Related tasks

Creating a quote from scratch

Creating invoices in invoice manager