HMRC have classified that the supply and purchase of certain goods and services are subject to Domestic Reverse Charge VAT, as per the following guidance and notices.
Note: It is important to understand that Domestic Reverse Charge VAT is not to be confused with the reverse charge for the purchase of cross-border services.
All qualifying goods and services should be assigned an Item VAT Group, specifically setup to support reverse charge VAT.
When purchasing qualifying goods or services, Dynamics should create two VAT transactions. An output vat (vat payable) transaction marked as reverse charge, and an input vat (vat receivable) transaction calculated at the standard vat rate
These transactions should result in …
- the output tax payable on purchases being reported on the vat return in box 1, but the goods amount being excluded from box 6
- the input tax receivable and goods value being reported normally in boxes 4 and 7 on the vat return.
When selling qualifying goods or services, Dynamics should create a single vat transaction. An output vat (vat payable) transaction marked as reverse charge.
This transaction should result in the sales invoice, output tax payable, goods value being reported on the vat return in box 6, with no output tax reported in box 1.
Sales Invoice, Document Output
Sales Invoice documents that include domestic reverse charge vat are subject to very specific rules as to how reverse charge vat should be represented on the printed sales invoice document.
This needs to be taken into full consideration when specifying, designing and developing Sales Invoice document layouts for Dynamics 365 Finance.