Flat Rate Scheme and the new Domestic Reverse VAT Charge

I spoke to HMRC and it is supported as I understand, with the FRS the sales under the new domestic reverse charge are to be excluded from their VAT returns as in theory they are not charging any VAT however they are still required to have the info on the invoices for the contractors i.e. showing the amount of VAT and that's what I was trying to get across.

Many thanks,

Rachel

Hello, 

I agree with Rachel Keeley, 

Flat rate scheme users can still raise reverse charge invoices, these are just not included on their VAT returns. Xero has this functionality within their software. Perhaps I should suggest to the client to move across. 

Hi

My client does about £100k turnover and the Flat rate scheme (FRA) is very financially beneficial to him.

Of the £100k he does about £500 CIS work so moving off the FRS to accommodate the Domestic Reverse Charge (DRC) on a couple of invoices a year makes no sense.

Is there not a way to produce a DRC invoice that is excluded from the VAT calculation?

Jeff Neil

Thank you for reaching out to us, @MoveOn.

I'll be glad to help you with your Tax concern.

I understand that you want further information about producing a DRC invoice that would not be included in the VAT calculation, which can be discussed further with HRMC as advised by my colleague Ashleigh1.

You can also check on this article: UK Flat Rate Scheme for more information about taxes.

We're always here in the Community to help if you have other questions related to QuickBooks. Stay safe!

This doesn't address the issue raised. Your colleague has stated that the FRS can't be used with the DRC. This is wrong, it can, but it appears your software is inadequate - it is not a question of raising it with HMRC, an accurate treatment and return should be provided in QB.

Considering your advertising stresses that small business owners can stop worrying about all their taxes because you are so great, I'd suggest this fails massively under trades descriptions.

Could not of worded this better VCW58. It is causing more trouble than it is worth .

Did this ever get resolved or is a manual adjustment required? 

I just had to accept that Quickbooks is not compatible with FRS plus Domestic Reverse Charge.

I was advised that the client should come off the FRS but it is financially beneficial for him to be on whereas there were only one or two Reverse Charge invoices. We just had to live with it.

However, we don't use QB for any new FRS clients...

Hi there, @louise_b. I want to ensure this will be taken care of.

The domestic reverse charge is reported and accounted for in the same way as the entries under the standard Value Added Tax (VAT) scheme. That said, I highly recommend reaching out to your accountant to determine which scheme applies to you and your business. They can also guide you if you need to make adjustments. For more details, please visit this article: VAT Domestic Reverse Charge (DRC) for CIS. 

For additional reference, feel free to read this article: VAT domestic reverse charge for building and construction services. 

I also added this helpful resource that you can use as a reference in managing your sales taxes in QBO. 
 

I'm always around here in the Community if you have any other concerns about sales taxes in QBO. Feel free to post again here. Have a good one and keep safe.