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Sub contractor Reverse VAT on invoices

  • February 10, 2021
  • 2 replies
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Do Gooder (Customer)
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Apps 7.5.

New construction sub contractors VAT handling rules are coming in soon and we have to handle the transactions and HMRC reporting.

The new rules mean the sub contractor invoices without any VAT and we have to add on the VAT to the invoice and report it to HMRC. We don’t want to pay the sub contractor the cash amount of VAT.

We can setup new VAT codes etc but this would pay the VAT amount to the sub contractor. I am thinking of setting  up a new Tax code with type Tax Withholding with tax received and tax withholding as Payment, will this work? Which Posting controls will need to be changed? 

Any advice would be much appreciated.

Best answer by Antbarrif

Hi there

 

Instead of Withholding Tax, use “Calculated Tax” tax type on your new tax code.

This will use posting controls IP9 and IP10 which you need to map to Tax Accounts but crucially do not effect the amount that is paid to the sub contractor.

IFS Will create ‘Reverse Charge’ Input VAT and Output VAT postings that can then be added to the relevant boxes 1-9 in your VAT Return. 

Depending on how you’ve mapped your tax codes (assuming you’re using some MTD Software) you will do this by mapping these Tax Codes within Tax Template Field Control in Template S089.

Have a play in a test database but I think Calculated Tax is the way to go for Reverse Charge.  Witholding tax handles actual deductions like CIS. 

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    A
    Sidekick (Partner)
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    • Antbarrif
    • Sidekick (Partner)
    • February 11, 2021

    Hi there

     

    Instead of Withholding Tax, use “Calculated Tax” tax type on your new tax code.

    This will use posting controls IP9 and IP10 which you need to map to Tax Accounts but crucially do not effect the amount that is paid to the sub contractor.

    IFS Will create ‘Reverse Charge’ Input VAT and Output VAT postings that can then be added to the relevant boxes 1-9 in your VAT Return. 

    Depending on how you’ve mapped your tax codes (assuming you’re using some MTD Software) you will do this by mapping these Tax Codes within Tax Template Field Control in Template S089.

    Have a play in a test database but I think Calculated Tax is the way to go for Reverse Charge.  Witholding tax handles actual deductions like CIS. 

    A
    1 person likes this
    • A
      Adam Bereda
    N
    Do Gooder (Customer)
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    That is exactly what we wanted. We have tested in our Test system and it is working well.

     

    Thanks.

    L
    1 person likes this
    • L
      ldoughty
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