Hi Peter/John, We are a contracting company and we have to account for reverse charge VAT. When I enter an invoice under money out I don’t see where to enter this. Can you advise please. Stephanie

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Hi Peter/John, We are a contracting company and we have to account for reverse charge VAT. When I enter an invoice under money out I don’t see where to enter this. Can you advise please. Stephanie

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Peter Connor ⋅ Staff May 8, 2016
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What exactly is reverse charge vat?

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  1. ridgeway May 8, 2016
    As a Principal Contractor we employ subcontractors. A VAT registered subcontractor does not charge VAT but we account for it on our VAT return. We input the VAT in T1 VAT on Sales and also in T2 VAT on Purchases. See Revenue Guide on Reverse Charge VAT for better explanation.
  2. Peter Connor May 8, 2016
    The way people have been handling this is that you create a "Bank Account" called "RCT - VAT". When entering the bill from the subcontractor, include the VAT amount. When marking this bill as paid, record the principal amount as being paid from your current account, and the VAT amount as being paid from the "RCT - VAT" account.

    When invoicing the client, you include the VAT. When the client pays you, you record the payment of the principal amount into your current account, and the amount of VAT that is eligible for RCT as being paid into the "RCT - VAT" account.
    Your accountant may be able to give you more guidance on how they normally record RCT, but the above describes what others have been doing.
  3. ridgeway May 8, 2016
    Ok Thanks

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