Reverse Charge VAT requirements are set out in the UK Government's VAT Notice 735. There is also guidance on the domestic reverse charge for supplies of building and construction services which apply from 1 March 2021 including when it should or should not be used.
To help comply with the requirements to make the reverse VAT charge clear on printed full invoices, EQ has a reverse VAT option which can be enabled. (This option is provided in EQ version 17.4.14 and above). When enabled this option changes:
- Show text and separate the VAT value for all Fitting group products, from the rest of the products/services on your order. (You can read more about product groupings in the article General Layout Product Grouping settings.)
- The invoice nett value and gross value will include all products (no change).
- The invoice VAT line will show the calculated VAT value for every product group except for Fitting. Under separate text about the reverse charge responsibility it will show the VAT value for all Fitting products.
This article covers:
Raise a full invoice with reverse VAT
Raise a part invoice with reverse VAT
Raise a free type credit note with reverse VAT
Raise an itemised credit note with reverse VAT
Config for reverse VAT
There is a setting in EQ's System Config that first needs to be enabled. This setting is available in EQ version 17.4.15 and above.
- From the main toolbar click System Config
- Scroll to Documents, click Invoice Layout on the left
- Tick the box Allow Reverse VAT Invoices/Credit Notes, shown here:
- Click Update to save and close your settings.
This setting is now enabled and will allow your users to select reverse VAT on appropriate invoices.
Raise a full invoice with reverse VAT
- Ensure you have enabled the reverse VAT setting in System Config above.
- Locate your order ref via Customer List or Sales Orders and right-click the Ref
- Select: Invoicing & Payments... > Full Invoice as shown:
- Tick the box: Reverse VAT Invoice:
(If you do not see this option ensure you have followed the System Config steps above).
- Click Save Invoice & Print.
The resulting invoice will have this text in red at the bottom:
Customer to account to HMRC for the reverse charge output tax on the VAT 'reverse charge' at the relevant VAT rate. VAT Amount at 20%: £ x,xxx.
The VAT amount for all Fitting group products will be calculated here.
The invoice VAT total amount will show VAT for all the products in other product groups (excluding Fitting). - Your full invoice is created and saved. You can reprint it by returning to the Customer List > Invoices tab.
Raise a part invoice with reverse VAT
- Ensure you have enabled the reverse VAT setting in System Config above.
- Locate your order ref via Customer List or Sales Orders and right-click the Ref
- Select: Invoicing & Payments... > Free Type Part Invoice
- Complete the amount either by selecting Invoice What to auto-fill the Nett Total or type the amount directly into Nett Total.
Add any text required in the Invoice Text box - Tick the box Reverse VAT Invoice (Applies to whole invoice value) and see the note that shows (as in the screen below:)
This invoice should be for a value appropriate to the Fitting products/services to meet the reverse VAT requirements. The total VAT on this part invoice will be shown under the reverse charge heading on the print out. - Click Save Invoice & Print to go to the Print window where you can preview, print or email as PDF.
The resulting invoice will show these words in red text at the bottom:
Customer to account to HMRC for the reverse charge output tax on the VAT 'reverse charge' at the relevant VAT rate. VAT Amount at 20%: £ x,xxx. - Your part invoice is created and saved. You can reprint it by returning to the Customer List > Invoices tab.
Raise a free type credit note with reverse VAT
A free type credit note allows you to credit any value of money to your customer. It is not related to a product.
- Ensure you have enabled the reverse VAT setting in System Config above.
- Locate your order ref via Customer List or Sales Orders and right-click the Ref
- Select: Invoicing & Payments... > Free Type Credit
- Enter the value for the credit note in Nett Total and the VAT will calculate.
- Tick the box Reverse VAT Invoice which will apply the reverse VAT rule to the whole value of this credit note when you print it:
- Click Save Credit Note & Print to go to the Print window where you can preview, print or email as PDF.
The resulting credit note will show these words in red text at the bottom:
Customer to account to HMRC for the reverse charge output tax on the VAT 'reverse charge' at the relevant VAT rate. VAT Amount at 20%: £ x,xxx. - Your credit note is created and saved. You can reprint it by returning to the Customer List > Invoices tab.
Raise an itemised credit note
An itemised credit note allows you to add products from the original order to create the value for the credit note to your customer. The value is a sum of all the products you add to the credit note.
- Ensure you have enabled the reverse VAT setting in System Config above.
- Locate your order ref via Customer List or Sales Orders and right-click the Ref
- Select: Invoicing & Payments... > Itemised Credit
- Click Edit at the bottom left (like editing a quote).
- Click the down arrow by Add and select Original Order Items:
- Tick all products you want to add and click OK. Click through any product option prompts that display as the products are added to the credit note.
- When you have finished adding all the products click Save.
If this credit note contains any products in the Fitting group and this order has previously had any invoices created that have the reverse VAT charge enabled, then you will be prompted whether to raise this credit note as a reverse VAT charge or not:
Click Yes to proceed with a reverse VAT charge. - Click Print to go to the Print window where you can preview, print or email as PDF.
The resulting credit note will show these words in red text at the bottom:
Customer to account to HMRC for the reverse charge output tax on the VAT 'reverse charge' at the relevant VAT rate. VAT Amount at 20%: £ x,xxx. - Your credit note is created and saved. You can reprint it by returning to the Customer List > Invoices tab.